Mortgage delinquencies on one-to-four-unit residential properties dropped to its lowest level since the second quarter of 2006 and the foreclosure inventory rate was at its lowest level since the second quarter of 2007, according to the latest Mortgage Bankers Association’s (MBA) National Delinquency Survey.

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The survey found that mortgage delinquencies decreased 14 basis points which was 47 basis points lower than one year ago,
to a seasonally adjusted rate of 4.52% of all loans outstanding at the end of the third quarter of 2016. In 2006, the delinquency rate was 4.39%.

The number of foreclosure starts was at its lowest level since the second quarter of 2000. It was down two basis points from the previous quarter, and down eight basis points from this same time last year, according to the MBA.

Loans that were at some stage of the foreclosure process was 1.55%, a drop of nine basis points from the previous quarter and 33 basis points lower than last year.

The percentage of loans in serious delinquency (90 days or more past due or in the process of foreclosure), was at its lowest level since the third quarter of 2007. The rate was 2.96%, down 15 basis points from previous quarter, and a decrease of 61 basis points from last year.

Marina Walsh, MBA’s Vice President of Industry Analysis, offered the following commentary on the survey:

Mortgage delinquency and foreclosure rates continued to decrease in the third quarter as sustained job growth and low unemployment helped more borrowers stay current with their mortgage payments. Monthly job growth averaged 206,000 jobs in the third quarter, making it the strongest quarter in 2016 thus far. The unemployment rate stayed just below 5 percent and wage growth continued to strengthen.

These factors helped the mortgage delinquency rate improve to 4.52 percent in the third quarter. The delinquency rate has decreased in almost every quarter since the beginning of 2013 and is below its historical average of 5.36 percent for the period from 1979 to the present.

Additionally, the 30-day delinquency rate decreased three basis points to 2.33 percent and the 60-day delinquency rate decreased four basis points to 0.77 percent from the previous quarter. Combined, the 30-day and 60-day delinquency rate was at its lowest level in the history of the survey dating back to 1979.

Among the various loan types, the delinquency rate improved for conventional loans as well as FHA and VA loans. The FHA delinquency rate dropped to 8.30 percent, its lowest level since the fourth quarter of 1997, while the VA delinquency rate decreased to 3.89 percent, the lowest level in the survey dating back to 1979.

The percentage of new foreclosures initiated in the third quarter was 0.30, making it the lowest rate since 2000 and below the historical average rate of 0.44 percent. FHA loans had a six basis point increase in foreclosure starts, although at 0.54 percent that rate is still below the historical average of 0.60 percent.

Continuing a downward trend that began in 2012, the foreclosure inventory rate declined to 1.55 percent in the third quarter of 2016. The percentage of loans in foreclosure continued to run higher in judicial foreclosure states than in states that utilize a non-judicial foreclosure process and states that use both processes. Regardless, the foreclosure inventory rate continues to decline across the board.

Of the 50 states and Washington, DC, 48 states either had no change or saw declines in the foreclosure inventory rate in the third quarter of 2016. New Jersey and New York had the highest percentage of loans in foreclosure, at 5.79 and 4.32, respectively, but both states saw double digit basis point decreases from the previous quarter.

Erik Sandstrom
LoanSafe's Mortgage Expert
I'm a Senior Loan Officer and LoanSafe mortgage expert. If you need a live rate quote, or need help getting a new mortgage, please call me direct anytime at 619-379-8999.