FHFA numbers signal shift in delinquency drivers

The majority of consumers with late mortgage payments are still citing a national emergency declaration when asked why they can't make good on their monthly obligations, but the share is shrinking as other concerns rise.

The percentage, at 58% in November 2022, was down notably in the Federal Housing Finance Agency's latest report, compared to 73% when the year began. The second-leading reason was curtailed income, which rose from 5% to 7% during the same time period. The share of delinquent borrowers with excessive debt, personal or family illness or unemployment has risen one percentage point to 3% in each category.

The shift in the numbers lines up with other indications showing that, with pandemic relief being phased out, economic conditions like the gap between wages and the cost of shelter are slowly putting pressure on loan performance.

Like other delinquency reports, the FHFA's shows some late payments and foreclosure starts — while still historically low — have started to rise back toward more normalized levels as completions remain muted.

Short-term delinquencies of 30-59 days rose to 0.89% of all loans serviced from 0.85% a month earlier in the FHFA's report. Mortgages 60-plus days late were up just a single basis point at 0.83%.

Fannie Mae and Freddie Mac, the government-sponsored enterprises that the FHFA oversees and which back a significant number of mortgages in the U.S., tend to have relatively better loan performance than the broader industry, suggesting stronger borrowers are experiencing a little more strain.

That said, muted completions in the broader industry and a decline in the 90-day-plus delinquency rate tracked by the FHFA suggests the additional emphasis the pandemic has placed on offering alternatives to foreclosure has helped stop some distressed borrowers from losing homes even as certain forms of relief get scaled back.

Serious delinquencies, including foreclosures, fell to 0.65% from 0.67% on a consecutive-month basis in the FHFA's latest loan performance report.

In other news, the FHFA also is soliciting input on whether the enterprises should further build out social bond programs.

Fannie and Freddie have issued multifamily mortgage-backed securities labeled as social bonds. They also have included some social disclosures in their single-family mortgage-backed securities issuances. The FHFA is now seeking feedback on the possibility of developing labeled single-family bond programs.

Environmental, Social and Governance bonds have found some favor with investors, and to issue securities with those labels, certain standards have to be met.