Mortgage delinquencies show improvement but still face pressure

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Late payments on single-family home mortgages improved on a consecutive quarter basis as more recovery from Hurricanes Harvey and Irma took hold, but more potential loan performance concerns lie ahead.

Overall, seasonally adjusted delinquencies in the first quarter declined by 54 basis points from the previous quarter but were just 8 basis points lower than the same period in 2017, according to the Mortgage Bankers Association's latest National Delinquency Survey.

"Mortgage delinquencies decreased from the previous quarter across all loan types — conventional, VA, and in particular, FHA — as the effects of the September hurricanes dissipated," Marina Walsh, the MBA's vice president of industry analysis, said in a press release. "The strong economy, low unemployment rate, tax refunds and bonuses and home price appreciation were key factors that helped push delinquencies down in the first quarter."

"Of course, there are offsetting factors that may put upward pressure on delinquency rates in future quarters, including a difficult recovery for some borrowers in hurricane-impacted states, the aging of loan portfolios, higher interest rates that limit a borrower's rate-term refinance options, higher energy prices, stretching of housing affordability given limited supply and the easing of credit overlays as mortgage market conditions have changed," Walsh added.

But for the time being, even the later-term delinquencies and defaults that were up in fourth quarter of 2017 look to have improved on a consecutive quarter basis.

Most notably, the delinquency rate for FHA loans, which previously had been particularly affected by the storms, plummeted. The 136-basis-point consecutive quarter improvement in the delinquency rate for FHA loans recorded in the first quarter marked the largest single-quarter decline ever seen in the survey.

The MBA defines loans that have forbearance, as many do as a result of the storms, as delinquent if payment was not made based on the original terms of the mortgage.

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Delinquencies Hurricane Harvey Hurricane Irma Distressed Mortgage Bankers Association