Delinquencies dropped for mortgages on one-to-four-unit residential properties in Q3 2021, according to the Mortgage Bankers Association’s (MBA) National Delinquency Survey.
The seasonally adjusted rate fell to 4.88% of all outstanding loans, down 59 basis points for Q2 and 277 basis points year-over-year (YOY). The survey asked servicers to report loans in forbearance as delinquent if the payment was not made based on the original terms of the mortgage.
“For the fifth consecutive quarter, the mortgage delinquency rate declined, commensurate with a decline in the U.S. unemployment rate over the same time period,” said Marina Walsh, CMB, MBA’s Vice President of Industry Analysis.
“The improvement was driven entirely by a decline in later-stage delinquent loans – those loans that are 90 days or past due, but not in foreclosure. By the end of the third quarter, many borrowers were approaching the 18-month expiration point of their forbearance terms and were being placed in permanent home retention solutions, such as modifications and loan deferrals. Once these borrowers entered permanent post-forbearance workouts and resumed payments, they moved from delinquent to current status.”
Around 7.7 million borrowers entered a forbearance plan during the pandemic. The majority have already exited those plans and 51% are current on their mortgage payments, while 23% have paid them in full by refinancing or selling their home.
However, more than 500,000 of those homeowners are now in active loss mitigation, a 37% increase month-over-month, according to Black Knight’s latest Mortgage Monitor Report.
Walsh noted that though pandemic stress is declining, many homeowners are still struggling with region-specific problems. In Louisiana, the delinquency rate increased by 118 basis points in Q3 due to the impact of Hurricane Ida. In Wyoming, it increased 3 basis points due to wildfires.
But the end of the foreclosure moratorium on federally-backed loans has been “muted,” she said.
“The foreclosure starts rate matched an all-time survey low first reached in 2020, and the foreclosure inventory rate dropped again. Homeowners, investors, and servicers have better options than proceeding with a costly and time-consuming foreclosure process.”
Foreclosures rose 5% in October, according to ATTOM’s Foreclosure Market Report, but remain at historically low levels.
“As expected, now that the moratorium has been over for three months, foreclosure activity continues to increase,” said Rick Sharga, executive vice president at RealtyTrac. “But it’s increasing at a slower rate, and it appears that most of the activity is primarily on vacant and abandoned properties, or loans that were in foreclosure prior to the pandemic.”