MBA: Mortgage Delinquency Rate Continued To Fall In Q1
The mortgage delinquency rate (30 days or more past due) as of the end of the first quarter stood at about 4.71%, down nine basis points compared with the previous quarter and down six basis points compared with the first quarter of 2016, according to the latest data gathered by the Mortgage Bankers Association (MBA).
The decrease was driven by a decline in delinquencies for Federal Housing Administration (FHA) and Veterans Affairs (VA) loans; the delinquency rate for conventional loans was flat compared with the fourth quarter, according to the MBA’s most recent National Delinquency Survey.
The percentage of loans on which foreclosure actions were started during the first quarter was 0.30%, an increase of two basis points from the previous quarter but five basis points lower compared with one year earlier.
The percentage of loans in the foreclosure process was 1.39%, down 14 basis points from the fourth quarter and down 35 basis points compared with one year ago.
The serious delinquency rate (90 days or more past due or in the process of foreclosure) was 2.76%, a decrease of 37 basis points compared with the fourth quarter and a decrease of 53 basis points from last year.
“Employment growth started 2017 on strong footing, with the economy adding 216,000 jobs in January 2017 and 232,000 jobs in February,” says Marina Walsh, vice president of industry analysis for the MBA, in a statement. “Average hourly wage growth increased 2.8 percent over the year and has maintained a generally increasing trend since late 2015. These fundamentals have helped to support the performance of all loan types – whether FHA, VA or conventional loans.”
As Walsh points out, mortgage delinquencies typically increase in the late fourth quarter and early first quarter of any given year, usually due to higher heating costs and holiday spending. However, this is usually reversed by the end of the first quarter.
“First-quarter results indicate that the increase in FHA delinquencies that we saw in the last quarter of 2016 has not been established as an ongoing trend,” she says.
Walsh also notes that the slight quarter-over-quarter increase in foreclosure starts was the first since the fourth quarter of 2014, “but this increase was accompanied by a sizable drop in loans that were 90 days or more past due.”
“It is likely that legacy distressed loans were held in the late-stage delinquency bucket by factors such as resolution attempts and state-specific requirements before eventually going into foreclosure status,” she says. “All 50 states and the District of Columbia saw a decrease in the 90-day-or-more delinquency rate.
“In addition, nearly all states had a decrease in the percentage of loans in foreclosure in the first quarter,” Walsh adds. “The overall percentage of loans in the process of foreclosure was 1.39 percent, its lowest level since the first quarter of 2007. While judicial states still had more than three times the percent of loans in foreclosure as non-judicial states, that measure declined to the lowest level since the fourth quarter of 2007.”
S&P/Experian: Default Rate For First Mortgages Fell To Four-Month Low In April
The default rate on first mortgages dropped to a four-month low in April, falling to just 0.69% of loans, which is down from 0.75% in March, according to the S&P/Experian Consumer Credit Default Indices.
The default rate on second mortgages was even lower at 0.51%, down from 0.57% in March, according to the report.
The report also measures the default rate on credit cards and auto loans. In April, the default rate for credit cards was 3.35%, up from 3.31% in March. The default rate for auto loans was 0.90%, down from 1.00%.
“Default rates on bank cards continue to creep higher, while default rates on auto loans are little changed,” says David M. Blitzer, managing director and chairman of the index committee at S&P Dow Jones Indices. “The Federal Reserve’s quarterly survey of senior bank loan officers revealed that a modest fraction of banks tightened standards on credit card loans and a similar portion of banks were tightening standards for auto loans. Banks also raised the spread over their cost of funds and increased the minimum credit scores required for auto loans. The same Fed survey showed weakening demand for auto loans. Separately, auto sales declined during the first quarter before seeing a slight rise in April. Demand for bank card loans was mixed, according to the Fed survey.
“Default rates on first mortgages are steady as home prices continue to rise in most parts of the country and sales of both new and existing homes increase,” Blitzer adds. “The Fed survey reported little change in either demand for mortgage loans or mortgage lending standards. The level of outstanding mortgage debt bottomed in the second quarter of 2014 and has been increasing steadily since then. After almost three years, outstanding mortgage debt is nine percent below the peak seen in the first quarter of 2008. Some analysts question if continuing increases in home prices presage a new housing bubble. Given conditions in the mortgage markets, this is not a current concern.”
Mortgage Delinquencies Hit Eight-Year High In April
The delinquency rate on first-lien mortgages (30 days or more past due) stood at 4.08% as of the end of April – an increase of 12.93% compared with March but a decrease of 3.58% from April 2016, according to Black Knight Financial Services’ First Look report.
It was the largest monthly increase in the mortgage delinquency rate in more than eight years, the company says.
However, Black Knight notes that the increase was primarily calendar-driven due to both the month ending on a Sunday and March being the typical calendar-year low and largely isolated to early-stage delinquencies.
As of the end of the month, about 2.072 million loans were 30 days or more past due – an increase of about 241,000 compared with March but a decrease of about 74,000 compared with April 2016.
About 581,000 properties were seriously delinquent (90 days or more past due but not in foreclosure) – a decrease of about 8,000 compared with March and a decrease of about 149,000 compared with April 2016.
The foreclosure presale inventory rate was about 0.85%, a decrease of 3.47% compared with March and a decrease of 27.34% compared with April 2016. That’s a 10-year low.
As of the end of April, there were about 433,000 properties in the pre-foreclosure inventory – a decrease of about 15,000 compared with March and a decrease of about 162,000 compared with April 2016.
There were about 52,800 foreclosure starts during April – a decrease of 12.44% compared with March and a decrease of 10.05% compared with April last year. It was the lowest foreclosure start rate since January 2005.
Prepayments were received on 0.86% of loans during the month – down 10.63% compared with the previous month and down 31.63% compared with a year earlier.
Black Knight: 19% Of Active HELOCs Scheduled To Reset
Since 2014, people in the mortgage servicing industry have been trying to forecast whether there will be a surge of defaults on the many home equity lines of credit (HELOCs) that are scheduled to reset over the next year or so.
Well, it appears they will soon find out: According to Black Knight Financial Services’ Mortgage Monitor report for March, about 19% of active HELOCs are scheduled to reset this year, which, according to Ben Graboske, executive vice president for Black Knight Data & Analytics, “is the largest share of active HELOCs facing reset of any single year on record.”
The good news is that if the “HELOC default wave” doesn’t hit, then servicers will have essentially dodged a bullet.
The report shows that more than 1.5 million HELOCs will see interest-only draw periods end in 2017, with payments becoming fully amortizing.
“With the lines beginning to reset this year and early into 2018, we’re seeing the last of the pre-crisis-era HELOCs that the industry has been focusing on since early 2014,” Graboske says in a statement. “After deceleration in early 2018, we will have a lull of several years in reset activity.”
Still, it could be a bloodbath, especially if the economy turns downward: On average, borrowers facing resets this year are looking at a “payment shock” of about $250 per month over their current HELOC payments – more than doubling their current payments, according to the report.
“Historically, those increases have impacted HELOC performance significantly; delinquency rates of 2006 vintage HELOCs – which reset last year – jumped by 74 percent,” Graboske says. “That was marginally lower than the 2004 and 2005 vintages, which saw delinquency rates rise by 90 percent and 88 percent, respectively.”