Mortgage rates have hit all-time lows several times in 2020. Home prices continue to soar higher throughout the country. On the other hand, the economy continues to recover steadily, with millions of jobs being regained in different economic sectors of the country. With all this going on, what did mortgage delinquencies in Q3 of this year? What do you expect to find? The Mortgage Bankers Association (MBA) recently conducted its National Delinquency Survey that has provided an overview of how mortgage delinquencies looked like in the third quarter.
According to the survey, the mortgage loan delinquency rate on one-to-four residential units dropped to a seasonally adjusted rate of 7.65% of all loans outstanding at the end of Q3 2020. The delinquency rate declined 57 basis points from the Q2 of 2020 and inclined by 368 basis points from the same time last year. However, it’s important to note that the MBA requires lenders to report loans in forbearance as delinquent if the payment was not settled based on the original terms of the mortgage loan for the purpose of the survey.
“Consistent with the improving labor market and the overall economic rebound, homeowners’ ability to make their mortgage payments improved in the third quarter,” said Marina Walsh, CMB, and MBA’s Vice President of Industry Analysis. “The decrease in the mortgage delinquency rate was driven by a sharp decline in newer 30-day delinquencies and 60-day delinquencies. Particularly encouraging was the 30-day delinquency rate, which reached its lowest level since MBA’s survey began in 1979.”
“Nonetheless, the 90-day and over delinquency rate continued to grow and reached its highest level since the second quarter of 2010. With forbearance plans still active and foreclosure moratoriums in place until at least the end of the year, many borrowers experiencing longer-term distress will remain in this delinquency category until a loss mitigation resolution is available,” Walsh adds.
According to Walsh, homeowners with FHA and VA loans continue to be disproportionately affected by the crisis brought by the pandemic. For that reason, the delinquency rate of FHA loans recorded a slight drop in Q3, but it was still at its second-highest rate in the survey.
Loan type breakdown.
By loan type, the survey showed that the total delinquency rate for conventional loans dropped 75 basis points to 5.93% from Q2. FHA delinquency rate declined six basis points to 15.59% from Q2, while the VA delinquency rate surged by 11 basis points to 8.16% from Q2, representing the highest level since Q1 in 2009.
The survey further revealed the five states with the largest plunges in their overall delinquency rate in Q3 from Q2 2020 are; New Jersey (-102), New York (-96), Alaska (-91), Florida (-74), and Nevada (-58). On the other hand, states that recorded the highest increases in their overall rate of delinquency in Q3 2020 from Q3 2019 are; Nevada (556 basis points), New Jersey (510), Hawaii (503), Florida (502), and New York (493).
Folks, the drop in mortgage delinquencies in the third quarter, is another proof that our economy is recovering, and the housing market is at the frontline. People are getting their jobs back, and cash flow in the economy is slowly returning. This further shows that now is the best time to buy real estate. Hurry up and take advantage of the current low mortgage rates and get yourself your dream home. The power is now.
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Disclaimer: The views and opinions of Eric Lawrence Frazier are his own and do not necessarily represent First Bank or any organization affiliated with Eric Lawrence Frazier, or the Power Is Now Media Inc. First Bank is an Equal Credit Opportunity Lender. Eric Lawrence Frazier, MBA, is also a Vice President and Mortgage Advisor with First Bank. NMLS#461807 and a California Licensed Real Estate Broker DRE# 01143482. Email: Eric.email@example.com. Ph: 714- 475-8629.
Eric Lawrence Frazier, MBA
President and CEO
The Power Is Now Media Inc.