"Homeowners are in Great Shape," Delinquencies Improve Across the Board

Mortgage loan delinquencies were down from the third quarter of 2018 in the fourth quarter. The Mortgage Bankers Association (MBA) said the improvements held across all loan types and all stages of delinquency although there was a slight uptick in foreclosure starts.

The delinquency rate for mortgage loans on one-to-four-unit residential properties decreased to a seasonally adjusted rate of 4.06 percent of all loans outstanding, down 41 basis points (bps) from the third quarter and 111 bps from the fourth quarter of 2017 according to MBA's National Delinquency Survey.

The percentage of loans on which foreclosure actions were started in the fourth quarter rose by 2 bps to 0.25 percent but MBA said that was probably due to the expiration of foreclosure moratoria in states affected by natural disasters. There were also starts associated with severely delinquent loans in judicial states that had finally moved into the foreclosure process.

Marina Walsh, MBA's Vice President of Industry Analysis said, "The overall national mortgage delinquency rate in the fourth quarter was at its lowest level since the first quarter of 2000.  What's even more noteworthy, the delinquency rate dropped from the previous quarter and on a year-over-year basis across all loan types and stages of delinquency."

Added Walsh, "With the unemployment rate near a 50-year low, wage growth trending higher and household debt levels relative to disposable incomes at a 35-year low, homeowners are in great shape, and mortgage performance is quite strong."

Walsh notes that in the fourth quarter of 2018, there were improvements in those states impacted by hurricanes and wildfires.  The delinquency rate in Florida dropped 458 bps on a year-over-year basis and the Texas delinquency rate fell 218 bps as the effects of 2017 hurricanes Irma and Harvey dissipated.  States affected by more recent storms such as North Carolina, South Carolina, Mississippi, Arkansas and Alabama showed improvements at the end of last year, after experiencing delinquency spikes in the third quarter.

"Florida's Hurricane Michael in October, as well as the California fires in November, have had limited impact on the overall delinquency rates in those states," said Walsh.

The 30-day delinquency rate declined 22 bps to 2.29 percent, the 60-day rates dipped 3 bps to 0.74 percent and the 90-day rate fell from 1.18 percent to 1.03 percent.  Delinquencies were down for conventional loans by 37 bps from the third quarter and 100 bps year-over-year to 3.19 percent. The FHA delinquency rate decreased 31 bps and 173 bps respectively to 8.65 percent. The VA delinquency rate decreased by 45 bps and 78 bps to 3.71 percent, over the previous quarter and year. 

The delinquency rate includes loans that are at least one payment past due but does not include loans in the process of foreclosure. The percentage of loans in the foreclosure process at the end of the fourth quarter was 0.95 percent, down 4 bps from the third quarter of 2018 and 24 bps lower than one year ago. This was the lowest foreclosure inventory rate since the first quarter of 1996.