Delinquencies ease as impact of hurricane disasters fades

Mortgage delinquencies continued lower at the end of the second quarter of 2018 with a seasonally adjusted rate of 4.36% of all residential loans (1-4 units).

The Mortgage Bankers Association reported Thursday that despite the 27 basis points decline, the rate was still 12 basis points above Q2 2017. Foreclosure starts were down 4 basis points quarter-over-quarter to 0.24%, the lowest rate since Q2, 1987.

"We continue to see improvement in the overall mortgage delinquency rate as the impact of the hurricanes from one year ago lessens, particularly for conventional loans," according to Marina Walsh, Vice President of Industry Analysis at MBA. "Among the various loan types, the delinquency rate for conventional loans was two basis points lower than one year ago, prior to the hurricanes. While delinquencies for both FHA and VA loans were up from one year ago, they were improved over the previous quarter."

Outlook strong but headwinds exist
She added that the outlook is good and supports strong loan performance with the economy growing and near-full employment.

But even so, there are headwinds that the MBA continues to monitor for signs of rising issues.

“Like past natural disasters, the wildfires in California may have a negative impact. Other factors include the aging of servicing portfolios as mortgage refinances slow, and the changing credit quality among certain loan types."

Both Texas and Florida continue to recover from the September 2017 hurricanes.

The non-seasonally-adjusted overall mortgage delinquency rate in Texas dropped by 26 basis points to 5.36% in the second quarter. The rate was 5.05% before the hurricane.

In Florida, the non-seasonally-adjusted overall mortgage delinquency rate on all loans dropped 139 basis points to 5.20%. Before the hurricane the rate was 4.07%.