Mortgage statistics offer good news, bad news

The bad news is that mortgage delinquencies are up. The good news is that mortgage applications are also up along with rebounding home sales.

According to the Mortgage Bankers Association, the total number of loans now in forbearance increased from 8.16% of servicer volumes in the prior week to 8.36% as of May 17. MBA’s estimate is that 4.2 million homeowners are now in forbearance.

The national mortgage delinquency rate for one-to-four unit residential unit properties was at a historic low at the end of the fourth quarter 2019. By the end of the first quarter 2020, the delinquency rate increased to a seasonally-adjusted rate of 4.35%.

In contrast, the foreclosure inventory rate (the percentage of loans in the foreclosure process) was at its lowest level last quarter since 1984. Foreclosure actions fell very slightly by 2 basis points in the first quarter to 0.19% of all outstanding loans.

“It is clear the COVID-19 pandemic is impacting homeowners,” wrote Marina Walsh, MBA’s vice president of industry analysis in its weekly residential mortgage survey. “The major variances from the fourth quarter of 2019 to this year’s first quarter are tied to the increase in early-stage delinquencies for all loan types.

“Mortgage delinquencies track closely with the U.S. job market. With unemployment rising from historical lows in early 2020 to a record 14.7% in April, it is inevitable that mortgage delinquencies would increase as well … with signs of economic distress continuing into the second quarter, mortgage delinquencies will likely further increase.”

According to the MBA, there may be a flattening effect in foreclosure starts in the next two quarters because of COVID-19-related foreclosure moratoriums and borrower forbearances under the guidelines of the Coronavirus Aid, Relief, and Economic Security Act. Regardless, nearly 4 million residential mortgage debtors were granted forbearance by the first week of May.

Walsh added that once the forbearance periods end, “borrower repayment and modification options, combined with year-over-year equity accumulation and home-price gains, may present alternatives to foreclosure for the millions of distressed homeowners affected by this unfortunate pandemic and economic crisis.”

Based on its first-quarter survey of mortgage lenders, the MBA reported that the seasonally adjusted mortgage delinquency rate increased for all loans outstanding.

The total delinquency rate — which includes 30-day, 60-day, and 90-day or more past due — for conventional loans increased to 3.16% over the previous quarter. The FHA delinquency rate increased to 9.69%, the highest level since the fourth quarter of 2017. The VA delinquency rate increased to 4.65% over the previous quarter, the highest level since the first quarter of 2015.

The 30-day delinquency rate rose to 2.67 %. The seasonally adjusted 30-day delinquency rate for conventional loans increased to 1.9% over the previous quarter. Both the FHA 30-day delinquency rate increased to 6.09% and the VA 30-day delinquency rate increased to 2.81% over the previous quarter.

The 60-day delinquency rate increased to 0.77%. The 90-day-or-more past-due delinquency rate increased to 0.93%.

A distinction must be made between delinquency and loans in foreclosure. The MBA delinquency rate includes loans that are at least one payment past due but does not include loans in the process of foreclosure. The percentage of loans in the foreclosure process at the end of the first quarter was 0.73%. Oddly enough, this is the lowest foreclosure inventory rate since 1984. The widening spread between delinquency and foreclosure underscores the increase in forbearance, which has the effect of delaying or preventing foreclosures due to the grace period guidelines of the CARES Act.

The seriously delinquent rate, the percentage of loans that are 90 days or more past due or in the process of foreclosure, was 1.67%, a slight decrease from last quarter. Compared to a year ago, the seriously delinquent rate decreased for conventional loans, FHA loans and VA loans.

Note that mortgage delinquencies reported by the MBA are seasonally adjusted to remove seasonal effects such as the receipt of tax returns and bonuses, which tend to pull first-quarter early-stage delinquencies downward; however, foreclosure starts, foreclosure inventory, and the seriously delinquent rate are not seasonally adjusted.

The increase in mortgage delinquency is offset by a rise in mortgage applications for residences, according to both the MBA and Oxford Economics.

According to OE, seasonally-adjusted total mortgage applications as measured by the Market Composite Index rose 2.7% for the week ending on May 22. On an unadjusted basis, MBA reported that the MCI increased 3% compared to the week before. Applications rose 8.6%, marking the sixth consecutive increase and pushing the MCI to its highest level since late January.

The Refinance Index decreased 0.2% for the week ending on May 22 while the seasonally-adjusted Purchase Index increased 9% from one week earlier.

Taking a longer view, after declining 18.7% in April, mortgage applications in the United States were up 31.5% through May 22, indicating a rebound in home sales for May after declining 17.8% nationally in April.