Delinquencies eased in January, foreclosure activity trended higher

Mortgage delinquencies eased in January after an uptick to end 2022, but foreclosure numbers trended higher, according to Black Knight.

The national delinquency rate inched down 10 basis points from December to 3.38% last month, a share equal to 1.8 million homes, the data analytics provider said in its monthly First Look report. On a year-over-year basis, delinquencies came in 15.1% lower.

The number of distressed loans decreased in all stages, with the biggest drop in defaults occurring among mortgages 30 days past due, down by 46,000 or 4.8%. Loans delinquent by 60 to 90 days also edged downward. Meanwhile, serious delinquencies of 90 days or more dropped by 4,000, with improvement seen in 44 states. Florida, however, saw its serious delinquency number rise by 1,700 loans, as many residents in the Sunshine State continue dealing with damages brought on by Hurricane Ian in late September.

But at the same time as delinquencies decreased, the volume of foreclosure starts shot up for a fourth straight month, jumping higher by 16.9% to 33,000 properties. The number came in 16% lower from a year ago, though, and, despite the recent upward trend, stands 37% under pre-pandemic levels, Black Knight said.

Homes in active foreclosure inventory also grew by 2.5% from December and 20% on an annual basis but stood 20% under the pace just prior to the onset of COVID-19. Foreclosure completions surged 15.2% from the previous month as well to approximately 7,000 properties, but that total is almost 50% under the pre-pandemic number. 

Housing industry leaders have been focused this week on some of the successes and challenges servicers faced following the sunset of COVID-19 relief measures at a Mortgage Bankers Association conference. Lower than anticipated levels of serious distress and foreclosures while these strategies were in place during the pandemic have led to proposals for more permanent successors. 

The amount of home equity gained since 2020, and general strength of the U.S. economy, also helped limit distress and in particular foreclosure completions, economists have noted. But some has been wiped out since summer 2022 as the housing market has struggled, with Black Knight previously pointing to potential trouble among a notable share of newer mortgages now in a precarious state.

The total number of mortgages considered noncurrent, including defaulted loans and homes in foreclosure totaled just over 2 million. States with the greatest share of homeowners considered noncurrent were concentrated in the South, led by Mississippi at 8%, Louisiana at 7.6% and Alabama at 5.7%.

Western states had the smallest percentages of noncurrent mortgages, with Washington on top at 1.99%, followed by Colorado and Idaho, both at 2%.

Black Knight's January report began incorporating information obtained from its expanded McDash database, in addition to the company's analysis of public performance metrics. With more than 80 contributors, the new data aims to add greater coverage of nonbanks and smaller servicing businesses

The expansion is timely "given the fundamental changes we've seen in the market's makeup — even before the pandemic — and as the industry and wider economy move ahead into an uncertain future," said Ben Graboske, president of Black Knight Data & Analytics, in a press release.