Mortgage performance remained strong in September despite Federal Housing Administration loans driving up total foreclosures, according to new industry data.
Overall foreclosure volume remained historically low, with foreclosure sales reaching 21,000 in the third quarter this year, roughly half of 2019's pre-pandemic levels, according to a report from ICE Mortgage Technology. FHA loans accounted for the majority of the year-over-year rise, making up about half of the annual rise in foreclosure starts and 80% of the rise in active foreclosures.
"We have been seeing FHA delinquencies grow, you're starting to see that move into foreclosures," Andy Walden, head of mortgage and housing market research at ICE, told National Mortgage News this week. "The foreclosure story early this year had been that foreclosures are up, but it's a
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There were 103,000 foreclosure starts in the third quarter, a 23% increase from the same period last year, but 18% below the third quarter in 2019.
"The mortgage market remains remarkably resilient, with mortgage performance continuing to hold up well," Walden said in the release. "Delinquency rates improved in September, and even as we see increases in activity among FHA loans, we're largely returning to more typical levels following several years of artificially low foreclosure volumes."
The national delinquency rate fell two basis points last month to 3.42%, down six basis points from a year ago and 58 basis points from September 2019, the report showed. Delinquency rates of 30 or more days and 90 or more days both improved month-over-month as well, dropping by 8,000 and 5,000, respectively.
The noncurrent rate declined year-over-year for government-sponsored enterprise loans by three basis points, VA loans by four basis points and portfolio-held loans by 17 basis points. FHA loans were a notable exception, rising by 44 basis points.
"What you're seeing is that growth in FHA delinquencies is starting to make its way into active foreclosure activity out there in the market, and that's something that we're watching more closely," Walden said. "Is there enough risk to cause concern in the FHA insurance fund? We're nowhere near that right now."
Regionally, Louisiana and Mississippi led the country by a wide margin with noncurrent rates near 8% in September, while Idaho and Washington rested just above 2%. Utah saw the largest 12-month change at 7.28%, followed by Arkansas and Arizona.
"What folks are primarily looking at is, are we seeing enough of this growth in certain pockets of the country that it could begin to impact foreclosure activity, home price dynamics and distress sale activity in certain areas?" Walden said. "Even on the extreme end, we're not seeing anything that's extremely concerning."
