Mortgage delinquencies in the fourth quarter were at their lowest level in nearly 19 years, helped by wage growth, low household debt and low unemployment.
According to the Mortgage Bankers Association, the delinquency rate for single-family mortgage loans decreased to a seasonally adjusted rate of 4.06% of all loans outstanding, down 41 basis points from the third quarter and down 111 basis points from one year ago.
Even more impressive, the MBA’s National Delinquency Survey showed that the drop was across all loan types and all stages of delinquency, according to Marina Walsh, the MBA’s vice president of industry analysis.
The conventional loan delinquency rate was 3.19%, down 37 bps from the third quarter and 100 bps from one year prior. For Federal Housing Administration-insured loans, the rate was 8.65%, down 31 bps from the previous quarter and 173 bps from the previous year. For Veterans Affairs loans, the rate of 3.71% was down 45 bps and 78 bps, respectively.
“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 said.
The delinquency rate improved in states that were affected by natural disasters in the fourth quarter of 2017. For Florida, the delinquency rate fell 458 basis points, while in Texas it was down 218 basis points. The report showed that recent events, Florida’s Hurricane Michael and the California wildfires, have had “limited impact on the overall delinquency rates in those states.” Even states that were affected by storms in the third quarter of 2018, like North Carolina, South Carolina, Mississippi, Arkansas and Alabama, all showed improvement in the most recent period.
The report’s only negative finding was foreclosure starts increased by 2 basis points between the third and fourth quarters to 0.25%. This increase was driven by the lifting of moratoriums in states affected by natural disasters, along with severely delinquent loans that finally moved into the foreclosure process, especially in judicial states, Walsh said.
The serious delinquency rate, loans that are 90 days or more past due or in the process of foreclosure, was 2.06%, down 7 bps from the third quarter and 85 bps from the fourth quarter of 2017. Loans 30 days past due saw a seasonally adjusted decline to 2.29% in the third quarter and 2.6% for the fourth quarter of 2017.