Although the percentage of mortgage delinquencies increased marginally
during the fourth quarter of 2016, the rise came on the heels of a record-low
delinquency rate set during the third-quarter.
According to the Mortgage Bankers Association’s national delinquency
survey, the delinquency rate for mortgages on residential SFRs to four-unit
properties comprised 4.8% of all unpaid loans at the close of the fourth
quarter in 2016. This increase was a 28-basis point (0.28%) rise from
the third quarter of 2016 and a three-basis point (0.03) increase from
the fourth quarter in 2015.
Simultaneously, the foreclosure initiation rate fell two basis points to
its lowest percentage since 1988. Additionally, fourth-quarter foreclosure
starts of all types—Federal Housing Administration (FHA), Veteran
Home Loans (VA), and conventional—collectively declined, while the
total foreclosure index dropped two basis points to its lowest level since 2007.
The Mortgage Bankers Association report represented a mixed set of data.
Although the small fourth-quarter increase in mortgage delinquencies was
the first such occurrence since 2013, it was offset by the decrease in
both new foreclosure starts and the total number of loans in foreclosure.
The fourth-quarter delinquency rate increased across all types of loans,
FHA, VA and conventional, but the third-quarter total was the lowest since 2006.
However, these positive trends should be kept in perspective. Despite the
currently low aggregated foreclosure rates, it is still possible that
mortgage delinquencies may potentially rise in the near term, despite
improving economic metrics such as improved home valuations, positive
economic indicators, and higher employment rates.
Analyzing the various loan categories separately reveals potential explanations
for the incremental fourth quarter increase and suggests continued positive
performance across all mortgage types.
The seasonally adjusted FHA foreclosure percentage climbed from 8.3% in
the third quarter of 2016—the lowest rate since 1997—to 9.02%
during the fourth quarter. This statistic is specifically attributable
to the 55-basis point fourth quarter increase in the FHA 30-day delinquency group.
Turning next to the seasonally adjusted VA delinquency rates, there was
a marked increased from 3.89% during the third quarter—the lowest
percentage since 1979—to 4% in the fourth quarter of 2016. Still,
on an annual basis, the VA foreclosure rate fell 12 basis points.
The seasonally adjusted conventional mortgage delinquency level experienced
a 4.04% fourth-quarter increase from a previous 3.76% third-quarter base.
From a year-to-year analysis, the conventional loan delinquency rate rose
by six basis points. Although we continue to see a small uptick in delinquencies,
analysts indicated that it is reasonable to see a slight increase after
reaching historic lows over the past few years.