Delinquencies creeped upward to close 2022

Mortgage delinquency rates increased in December to close out the year, but still sat below its mark at the end of 2021, new data from Black Knight showed.

A growing number of missed early payments drove the overall rate upward, but more serious defaults of 90 days or more dropped on both a monthly and annual basis, according to the housing data and analytics provider's December First Look report.

Delinquencies as a share of serviced loans increased to 3.08% from November, representing a total of 1.65 million mortgages. The number includes all loans more than 30 days past due but not in foreclosure and came in higher by approximately 41,000. But year-over-year, the rate fell by about 9% or 146,000.

The monthly uptick appeared tied to a rise in early defaults, as accounts which were delinquent by 90 days or more declined by 5,000 and 401,000 on both a monthly and annual basis to 545,000 loans. Forty-four states saw serious delinquencies fall compared to November, with Florida being a notable exception. With many homeowners in the Sunshine State still dealing with damages from Hurricane Ian, the number of seriously delinquent mortgages there climbed by 8,700.

While the monthly rise might catch the attention of servicers, the general health of the typical U.S. homeowners appears on more solid footing compared to the same point a year ago, with the national rates lower.

Black Knight's December data largely corresponds to trends reported earlier this month by the Federal Housing Finance Agency, which found early-stage defaults up among loans held by Fannie Mae and Freddie Mac, but drops in more serious delinquencies and completed foreclosure-prevention activity. 

But servicers will be tracking the trajectory of defaults in the coming months, particularly for mortgages originated in the last 12 months With the housing market slowing and depreciating the values of some properties, Black Knight previously reported more than 250,000 loans originated in 2022 were already underwater at the end of the third quarter.

Meanwhile, in another sign of how rising interest rates have affected borrowers, prepayment activity dropped to 0.39%, with single-month mortality falling to a third consecutive low mark since Black Knight began tracking the data in 2000. Although low prepayment rates may benefit servicers with increased revenue over the long term in the form of more accrued interest on the one hand, they could also point to signs that households are facing tighter finances. 

A higher concentration of noncurrent mortgages occurred in the Southeast, with states in the area accounting for three of the top five spots in delinquency rates. Mississippi led the nation at 6.87%, ahead of Louisiana at 6.33%. Oklahoma, West Virginia and Alabama followed at 5.16%, 4.92% and 4.91% respectively.