Like the report from Black Knight earlier today, the
second quarter National Delinquency Survey from the Mortgage Bankers
Association shows the effects of the COVID-19 pandemic fading a bit in early
delinquency numbers but surging within the more serious non-current categories.

The overall rate of loans 30 or more days past due
increased during the second quarter to a seasonally adjusted 8.22 percent of
all outstanding one-to-four-unit mortgages. This was up 386 basis points (bps)
from the first quarter of the year and 369 bps year-over-year. MBA includes
loans in forbearance in its delinquency numbers.

Looking at delinquencies by bucket shows a slight
decline, 33 bps among loans 30-days or more past due to a 2.34 percent rate,
reflecting fewer loans becoming delinquent. Loans 60 to 90 days past due,
however, grew 138 basis points to 2.15 percent, the highest since MBA began
collecting data in 1979. Serious delinquencies, loans more than 90 days past
due soared 279 basis points to 3.72 percent, the highest since the third
quarter of 2010, at the height of the housing crisis.

“The COVID-19 pandemic’s
effects on some homeowners’ ability to make their mortgage payments could not
be more apparent. The nearly 4 percentage point jump in the delinquency rate
was the biggest quarterly rise in the history of MBA’s survey,” said
Marina Walsh, MBA’s Vice President of Industry Analysis. “The second
quarter results also mark the highest overall delinquency rate in nine years
,
and a survey-high delinquency rate for FHA loans.”

Added Walsh, “There was also a
movement of loans to later stages of delinquency, with the 60-day delinquency
rate reaching a new survey-high, and the 90+-day delinquency rate climbing to
its highest level since the third quarter of 2010. On a more positive note,
30-day delinquencies dropped in the second quarter, which is an indication that
the flood of new delinquencies may be dissipating.”

MBA’s report notes that mortgage
delinquencies track closely with the availability of jobs and the largest quarterly
increases in delinquency rates were New Jersey (628 bps), Nevada (600 bps), New
York (575 bps), Florida (569 bps), and Hawaii (525 bps). These states all have
economies that are reliant on leisure and hospitality jobs that were especially
hard-hit by the COVID-19 pandemic.

“The job market has improved
over the past three months, with the unemployment rate falling for the third
straight month
from an April peak of 14.7 percent to 10.2 percent in July.”
Walsh said. “This bright spot in the jobs picture is tempered by numerous
uncertainties, including the ambiguous status of enhanced unemployment benefits
and other stimulus measures, the recent surge in new COVID-19 cases, and the
retrenchment from reopening in certain states. “And there is no way to
sugarcoat a 32.9 percent drop in GDP during the second quarter. Certain
homeowners, particularly those with FHA loans, will continue to be impacted by
this crisis, and delinquencies are likely to stay at elevated levels for the
foreseeable future
.”

Added Walsh, “Fortunately,
there are several mitigating factors that make this current spike in mortgage
delinquencies different from the Great Recession. These factors include
home-price gains, several years of home equity accumulation, and the loan
deferral and modification options that present alternatives to foreclosure for
distressed homeowners.”

Increases in delinquencies were apparent across all loan types. VA loans
receives the smallest impact, an increase of 340 bps to a rate of 8.05 percent
but this was still the highest rate since 2009. The rate for conventional loans
increased 352 bps from Q1 to 6.68 percent, the highest rate since the third
quarter of 2012 and FHA delinquencies surged by 596 bps to 15.65 percent – the
highest rate since the survey began in 1979. All three loan products were also
significantly higher than a year earlier; conventional loans were up 307 bps,
VA loans 381 bps, and FHA loans were up 643 bps.

The most serious categories of delinquency
are not yet affected by the pandemic.
The percentage of loans in the
foreclosure process at the end of the second quarter was 0.68 percent, down 5 bps
points from Q1 and 22 bps lower than one year ago. The percentage of loans on
which foreclosure actions were started in the second quarter fell by 16 bps
from the first quarter to 0.03 percent. This decline may, in part, be due to
the foreclosure moratorium put in place for government-backed loans.

Longer term delinquency rates also
increased for all mortgage types on both a quarterly and an annual basis. The
seriously delinquent rate increased 219 bps for conventional loans, 467 bps for
FHA loans, and 218 for VA loans from the previous quarter. Compared to a year
ago, the increases were 184 bps for conventional loans, 453 and 217 bps for FHA
and VA loans, respectively.

By Jann Swanson , dated 2020-08-21 12:08:48

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Courtesy of Mortgage News Daily

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