In the second quarter of 2024, high house prices and rising mortgage rates caused more homeowners to have difficulty paying their loans. But the data shows a slight recovery as mortgage delinquencies fell in the third quarter.
That silver lining comes from the Association of Mortgage Bankers (MBA)’s National Delinquency Survey. According to the MBA, the seasonally adjusted delinquency rate on residential properties (one to four units) fell to 3.92% at the end of September. That is lower than the 3.97% at the end of June, but 30 basis points higher than a year ago. Delinquency rates include loans that are at least 30 days past due.
The quarterly survey assesses delinquency and foreclosure rates based on loan type, geographic information and demographics. MBA uses the research to monitor and predict trends in mortgage performance in the housing market. Types of loans examined include Federal Housing Administration (FHA) loans, The U.S. Department of Veterans Affairs (VA) loans and conventional loans.
FHA loans saw the largest decline in delinquencies in the third quarter, down 14 basis points to 10.46%. The rate for VA loans fell 5 basis points to 4.58% and the rate for conventional loans fell 1 basis point to 2.63%.
Year over year, default rates increased for all loan types: FHA loans increased 96 basis points, VA loans increased 82 basis points, and conventional loans increased 13 basis points.
MBA also reported that 30-day delinquencies saw the largest decline during the quarter, down 14 basis points to 2.12% of all loans. The 60-day delinquency rate fell 3 basis points to 0.73%, while the 90-day delinquency rate fell 7 basis points to 1.08%.
Lenders and consumers should remain cautious in the fourth quarter of 2024, according to Marina Walsh, MBA’s vice president of industry analysis.
“Mortgage delinquencies have increased over the past year,” Walsh said in a statement. “While there was a small decrease in total delinquencies in the third quarter compared to the previous quarter, this was driven by a decrease in 30-day delinquencies. Delinquencies increased last quarter, and total delinquencies increased by thirty basis points from a year ago.”
The share of foreclosed loans – calculated separately – rose to 0.45%, a slight increase on a quarterly and annual basis.
Geographically, the five states with the largest increases in defaults during the quarter were Texas (+24 bps), Arkansas (+14 bps), Florida (+13 bps), Arizona (+12 bps) and Wyoming (+9 bps ).
Falling default rates could indicate that homeowners are gradually recovering from difficult market conditions caused by high mortgage rates and other factors. But the MBA noted that the impacts of Hurricanes Helene and Milton in the fourth quarter of 2024 will likely influence the results of the next survey in the Southeast.
