New distress nudged the delinquency rate up in latest FHFA data

The monthly delinquency rate for loans backed by the government sponsored enterprises rose for the first time since May 2020, according to the latest Federal Housing FInance Agency numbers.

That rate inched up to 1.74% in July from 1.70% the previous month but was down from 2.68% a year earlier, in line with similar trends recorded in some other data sets that contain broader delinquency numbers.

GSE-backed loans typically perform relatively better than other subsets of the mortgage market, so the slight increase suggests that rising consumer costs are pinching borrowers across the board a little.

The delinquency rate for loans between 30 and 59 days late rose to 0.85% from 0.78%. The rate at which loans went delinquent for 60-89 days also increased a little, rising to 0.19% from 0.17%.

However, in line with the latest quarterly statistics published by the FHFA, longer term delinquencies continued to fall, suggesting that the distress in the current market is increasingly coming from near-term hardships as opposed to older ones from earlier in the course of the pandemic.

The serious delinquency rate for mortgages 90 days or more days late dropped to 0.75% from 0.79%. The 60 day plus delinquency rate fell to 0.89% from 0.92%.

In line with that, forbearance numbers recorded by the FHFA also suggest that a large number of people with hardships from earlier in the pandemic either have resolved them in a way that allows them to resume regular payments or are in the loss mitigation process.

Borrowers who have been in forbearance less than three months made up the largest segment, constituting 38% of borrowers who had suspended payments on their GSE-backed loans at the end of July.

The plan duration for 28% of these borrowers was more than three months, but less than six. For 18%, it was more than six months but less than nine. Just 10% had been in plans for more than nine months but less than 12. Finally, only 6% had been in a plan for more than a year.

Total mortgages in forbearance fell to 84,385 from 90,889  the previous month, and made up just 0.27% of all loans serviced and 16% of delinquent loans.

Overall, the GSEs took 23,874 foreclosure prevention actions in July, bringing its total to more than 6.61 million since the Great Recession's housing crash forced them into government conservatorship in September 2008.

Modifications in which borrowers received changes to mortgage terms aimed at bringing debt obligations in line with their current ability to repay represented 39% of these.

Borrowers with loans backed by the GSEs received 8,925 permanent loan modifications in July. In total the GSEs have modified more than 2.59 million loans over the past 14 years.

Even though rates did fall slightly to 5.41% from 5.52% in July on a consecutive month basis, the drop didn't spur much refinancing activity, according to the FHFA's report. Total refinances dropped to 69,166 from 97,881 in June, and 330,127 in July 2021.