Delinquency rate now at its lowest since 1979

The nationwide delinquency rate decreased for the second consecutive quarter, dropping to a decades-long low, the Mortgage Bankers Association said.

The share of outstanding mortgages for one-to-four unit properties with a missed payment stood at a seasonally adjusted 3.37% at the end of June, according to the MBA. The percentage reflected a 19 basis-point drop from 3.56% at first-quarter's end, the second lowest delinquency rate at the time since at least 1979, when the MBA first began reporting the data. At the end of second quarter 2022, the national delinquency rate was 3.64%.

Generally favorable economic data, including wage growth and historically low unemployment figures, are helping to keep borrowers from distress, according to Marina Walsh, MBA vice president of industry analysis.

"Buoyed by a resilient job market, homeowners are continuing to make their mortgage payments," she said in a press release. 

Second-quarter numbers fell across all primary mortgage types: conventional loans and government products guaranteed by the Federal Housing Administration and the Department of Veterans Affairs. The delinquency rate for conventional mortgages declined 15 basis points quarter-to-quarter to 2.29%, its lowest since 2004. For VA-backed loans, the share of delinquent mortgages relative to overall volume was 3.7%. The FHA rate came in at 8.95%, reflecting a 32 basis point reduction. 

On an annual basis, both conventional and VA delinquency rates also dropped by 35 and 52 basis points, respectively. But the share of FHA-guaranteed loans in arrears grew by 10 basis points, a possible sign of economic and credit stress hitting some segments of consumers, Walsh said.

'Delinquencies are rising for other forms of credit such as credit cards and car loans," she said. "As the economy slows and labor market cools, homeowners with FHA loans are likely to feel the distress first." 

The MBA's report comes after Federal Reserve economists revealed this week credit card balances surpassed $1 trillion for the first time ever. Late payments on credit cards also rose compared to a year ago but showed more recent signs of moderation.

MBA calculates delinquencies based on the volume of loans at least one payment past due but does not include mortgages in the foreclosure process. In its research, MBA asks servicers to report loans in forbearance as delinquent if the payment was not made based on the original terms of the mortgage.

By stage, the rate of mortgages with payments 30 days past due came in at 1.75%, while the 60-day delinquency share stood at 0.55%. Loans delinquent by 90 days or more equaled 1.07%. 

Foreclosure numbers, while not included in the MBA's delinquency data, appeared to be on a similar downward track. The total share of mortgages going through some stage of the foreclosure process was 0.53% as of June 30, down by 4 and 6 basis points quarterly and annually. New foreclosure starts in the second quarter inched down to a rate of  0.13%, 3 basis points lower from where they sat at the end of March.

The MBA's findings corresponded somewhat to similar trends reported by real estate business intelligence provider Attom, who this week said both starts and foreclosure inventory were decreasing this summer. But Attom found the total number of properties with a foreclosure notice against them higher on a year-over-year basis.