Delinquencies Fall To Another Record Low

Mortgage loan delinquencies dropped to 3.45% of all loans outstanding in Q3 2022, once again breaking the record for the lowest point since 1979.

According to MBA’s National Delinquency Survey, delinquencies were down 19 BPS from Q2 and 143 BPS from a year earlier.

Foreclosure starts and loans in the process of foreclosure also fell further, and remain below historical averages.

“The relatively small number of seriously delinquent homeowners are working with their mortgage servicers to find foreclosure alternatives, including loan workouts that allow for home retention,” said Marina Walsh, CMB, MBA’s Vice President of Industry Analysis. 

Alternatives can include reinstatement, loan modification, deed-in-lieu of foreclosure, or short sale.

Booming home equity is one of the reasons foreclosures have remained low even after government moratoriums ended.

Nearly half of mortgaged residential properties in the U.S. are considered “equity-rich.” In total, 94.3% of all mortgage holders have at least some equity in their homes.

“We believe… borrowers are leveraging their equity and selling their homes rather than risking the loss of their equity in a foreclosure auction,” Rick Sharga, Executive VP of Market Intelligence at ATTOM Data, noted.

Homeowner equity did contract in Q3, but fewer than half a million mortgagees owe more on their homes than their current values.

Walsh does expect delinquencies to worsen in the coming months. Economists expect a recession at the beginning of 2023, which will lead to financial trouble for many. Unemployment is expected to reach 5.5% by the end of 2023.

“The delinquency rate will likely increase in upcoming quarters from its current record low because of both the anticipated uptick in unemployment and the effect of natural disasters like Hurricane Ian in Florida, South Carolina, and other states, which will likely result in an increase in forbearance agreements to allow impacted homeowners to get back on their feet,” she said.

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