The rate of mortgage delinquencies increased in the second quarter of this year, with loans at default for 60 days or less accounting for the annual surge, according to the Mortgage Bankers Association (MBA).
“While delinquencies are still low by historical standards, the recent increase corresponds with a rising unemployment rate, which has historically been closely correlated with mortgage performance,” certified mortgage banker Marina Walsh, the association’s vice president of industry analysis, said.
The state with the largest quarterly increase in delinquency rates was Mississippi, followed by Louisiana, Indiana, Ohio, and West Virginia.
Walsh points out that the composition of mortgage delinquencies has “evolved” based on the stage of delinquency. Mortgages in the early stage of delinquency—unpaid for 60 days or less—made up the entire 60 point overall delinquency increase from the previous year, she said.
“Meanwhile, seriously delinquent loans—those loans 90 days or more delinquent or in foreclosure—fell to their lowest levels since 1984 as servicers are helping at-risk homeowners avoid foreclosures through loan workout options that can mitigate temporary distress,” Walsh said.
As interest rates began to rise and excess savings from the COVID-19 pandemic depleted, the rate of delinquencies also started to go up. When financial conditions tightened, delinquency rates exceeded their pre-COVID-19 pandemic averages.
While mortgage delinquencies have risen in recent times, the rate has remained below the pre-COVID-19 pandemic level—a far cry from credit card and auto delinquency rates that have gone beyond the pre-COVID-19 pandemic levels.
“Part of the reason mortgages have performed better than auto and credit cards is because 92 percent of U.S. household mortgages have fixed rates, while most auto and credit card debt is variable rate,” Freddie Mac stated.
‘Gradual Increase’ in Foreclosures
In a July survey from real estate marketplace Auction.com, default servicing experts said they expect “a gradual increase in foreclosure volumes in the second half of the year.”Respondents pointed to rising “hidden” housing costs such as homeowners insurance and property taxes as the biggest potential risks that could push up mortgage delinquency rates.
Daren Blomquist, vice president of market economics at Auction.com, said that although the risk of delinquencies rising rapidly in the near term is low, there are signs suggesting that homeowners are under stress.
Meanwhile, completed foreclosure volumes so far this year have remained at half the 2019 levels, mostly because of “more robust loss mitigation options coming out of the pandemic,” Joe Cutrona, chief business officer of Auction.com, said.
Foreclosure activity so far this year is the fourth lowest since 2008.
“U.S. foreclosure starts also decreased by 3 percent in the first six months of 2024. These shifts could suggest a potential stabilization in the housing market,” Rob Barber, CEO of ATTOM, said.
States that saw the highest increase in foreclosure activity in the first half of 2024 compared with a year back were South Dakota, followed by North Dakota, Kentucky, Massachusetts, and Idaho.
States with the highest foreclosure rates during this period were New Jersey, followed by Illinois, Florida, Nevada, and South Carolina.
