FHA borrowers make up a small share of mortgages but dominate past-due loan growth
Mortgage delinquency rates inched up again in February, with a noticeable increase tied to FHA loans, according to the latest data from Intercontinental Exchange (ICE).
The national delinquency rate rose by five basis points to 3.53% for the month, a 19-basis-point jump from a year earlier. Despite the uptick, delinquency rates remain 32 basis points below pre-pandemic levels.
FHA loans were a major contributor to the annual rise in delinquencies, accounting for roughly 90% of the 131,000 increase in past-due loans over the past year, even though they make up less than 15% of all active mortgages.
ICE’s report showed that 1.91 million properties were 30 or more days past due, an increase of 28,000 from January. Of those, 528,000 loans were 90 or more days past due, down 12,000 from the previous month.
In some areas, natural disasters added to distress. In Los Angeles, the number of homeowners past due due to wildfires jumped from 700 in January to 4,100 in February — a number that may climb further in March, ICE noted.
Meanwhile, foreclosure activity slowed in February.
Foreclosure starts dropped 17.2% month-over-month to 33,000, though that figure was still 34.5% higher year-over-year due to the resumption of VA foreclosure activity after a moratorium.
Foreclosure sales declined 11.4% for the month to 5,600 and were down 7% from a year ago. The total foreclosure inventory held steady at 211,000 properties.
“February’s rise in foreclosure filings suggests evolving market pressures,” ATTOM CEO Rob Barber said. “While some increase may reflect seasonal trends, the uptick in foreclosure starts both month-over-month and year-over-year signals potential shifts.”
Loan workouts increase
According to the Mortgage Bankers Association’s latest Loan Monitoring Survey, the percentage of loans in forbearance declined slightly from 0.40% in January to 0.38% at the end of February. That equates to about 190,000 borrowers still in forbearance, a small portion of the 8.6 million granted since March 2020.
The decrease was seen across investor categories:
- Fannie Mae and Freddie Mac loans dropped to 0.15%
- Ginnie Mae loans fell to 0.84%
- Portfolio and private-label securities dropped to 0.37%
Despite the improvement, the number of loan workouts and forbearance plans increased year-over-year, according to MBA vice president of industry analysis, Marina Walsh.
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“The year-over-year gain may be attributed to increasing escrow payments for taxes and insurance, inflationary pressures, natural disasters, aging servicing portfolios, and a softening in the labor market,” Walsh said.
Prepayment activity also continued to slow in February, with the monthly single-month mortality (SMM) rate falling to 0.46% — the lowest reading in 12 months. ICE attributed the decline to seasonally lower home sales and higher mortgage rates.
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