Mortgage Delinquencies Rose In Q3 As Jobs Market Eased

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The mortgage delinquency rate on residential properties rose in the third quarter as the labor market softened, according to the Mortgage Bankers Association's (MBA) National Delinquency Survey.

The delinquency rate includes loans that are at least one payment past due but not in the process of foreclosure.

For the quarter ended September 30, the delinquency rate for mortgages on one-to-four unit residential properties increased to 3.62% from 3.37% the prior quarter, the survey showed.

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“The national mortgage delinquency rate increased in the third quarter from the record survey low reached in the second quarter of this year, with an uptick in delinquencies across all loan types — conventional, FHA and VA,” said Marina Walsh, MBA vice president of Industry Analysis.

The increase, Walsh said, was driven by a rise in earliest-stage delinquencies, or those that were 30- and 60-days past due. Later-stage delinquencies, or those that were at least 90 days past due, declined to the lowest level since the first quarter of 2020, she added.

Mortgage delinquencies track closely with the labor market, Walsh said. The unemployment rate increased to 3.9% in October, its highest level since January 2022, the survey showed.

“The increase in unemployment will likely mean further increases in mortgage delinquencies, particularly for FHA borrowers,” Walsh said.

Delinquency rates in focus

By loan type compared to last quarter, the delinquency rate for conventional loans increased 21 basis points to 2.5%, while the rate for FHA loans increased 55 basis points to 9.5%. The delinquency rate for VA loans increased 6 basis points to 3.76%.

By delinquency stage compared to last quarter, the 30-day delinquency rate increased 28 basis points to 2.03%; the 60-day rate increased 7 basis points to 0.62%, and the 90-day rate decreased 9 basis points to 0.98%.

The non-seasonally adjusted seriously delinquent rate, which includes loans 90 days or more past due or in the process of foreclosure, decreased 9 basis points to 1.52% from the prior quarter, which is the lowest level since 1984, MBA said.

“The decline in later-stage delinquencies, along with a foreclosure starts rate of 0.14 percent — which is well-below the historical quarterly average of 0.40 percent — suggest that distressed homeowners may be utilizing available loss mitigation options that prevent a foreclosure start,” Walsh said. In addition, "accumulated home equity may also be enabling some homeowners to sell their homes well before foreclosure becomes a possibility.”

Joey Solitro is a freelance financial journalist at Kiplinger with more than a decade of experience. A longtime equity analyst, Joey has covered a range of industries for media outlets including The Motley Fool, Seeking Alpha, Market Realist, and TipRanks. Joey holds a bachelor's degree in business administration.

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Delinquency rates in focus

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