The cost of a home mortgage may be going up, but perhaps some good news: Fewer people who already own a home are missing payments.
Mortgage delinquency rates dropped for the seventh straight quarter, hitting the lowest level since the fourth quarter of 2019, according to the Mortgage Bankers Association.
Delinquency rates for mortgage loans on one-to-four unit residential properties dropped 43 basis points to 4.11% from the previous quarter. A basis point is 1/100th of one percent. Compared with the same period a year ago, the rate was down 227 basis points.
The delinquency rate includes loans that are at least one payment past due but does not include loans in the process of foreclosure. If the borrower is in forbearance but makes a payment, the loan is counted as current.
Most of this improvement in delinquency rates can be attributed to the 90-days or more delinquency bucket, which dropped 48 basis points to 1.96% in the first quarter from the previous quarter, the MBA said.
The 30-day delinquency rate declined 6 basis points to 1.59% and the 60-day delinquency bucket remained unchanged at 0.56%.
“The decrease in delinquency rates was apparent across all loan types, and especially for FHA [Federal Housing Administration] loans,” said Marina Walsh, vice president of industry analysis at the MBA. “The delinquency rate for FHA loans declined 118 basis points from fourth-quarter 2021 and was down 509 basis points one year ago.”
The delinquency rate for conventional loans dropped 55 basis points to 3.03% over the previous quarter, marking the lowest level since the fourth quarter of 2019. The Veterans Affairs delinquency rate fell 38 basis points to 4.86%, also the lowest level since the first quarter of 2020.
Delinquency rate tends to be highly correlated with the unemployment rate over time, Mike Fratantoni, chief economist at the MBA said in a September op-ed for Housing Wire. Fratantoni said this trend was clear in 2020 and 2021 as unemployment and delinquency rates spiked during the onset of the pandemic, then fell sharply as the economy rebounded.
He forecast that unemployment would likely drop below 4% by the end of 2022 and that the delinquency rate should follow that downward path closely.
Meanwhile, the expiration of pandemic-related foreclosure moratoriums rose to 0.19% in foreclosure starts, remaining well below the quarterly average of 0.41% dating back to 1979.
“Given the nation’s limited housing inventory and the variety of home retention and foreclosure alternatives on the table across various loan types, the probability of a significant foreclosure surge is minimal,” Walsh said. “Borrowers have more choices today to either stay in their homes or sell without resorting to a foreclosure.”
Louisiana led the largest quarterly drop in overall delinquency rates at 168 basis points.
About 525,000 homeowners were on forbearance plans as of March 31, 2022, according to the MBA.
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