Conventional and FHA serious mortgage delinquency rates are lower than pre-pandemic levels, but numbers for VA loans are slightly higher
The nation’s overall mortgage delinquency rate was unchanged year over year in October 2023 and remains near an all-time low, according to the latest CoreLogic Loan Performance Insights report.
The U.S. serious delinquency rate (defined as borrowers who are 90 days or more late on their mortgage payments) was 0.9% in October 2023, down from 1.2% from one year earlier%. [1] When compared with the peak serious delinquency rate for mortgages in August 2020, October’s rate was down by 3.4 percentage points.
Low unemployment numbers have helped reduce the overall delinquency rate, as have mortgage modification programs offered to those who were in forbearance. And while serious delinquencies for all types of mortgages have declined over the past three years, it’s important to examine the trends by loan type, as some are more sensitive to changes in the macroeconomic environment.
As of October 2023, the serious delinquency rates for Federal Housing Administration (FHA), U.S. Department of Veterans Affairs (VA) and conventional loans were 3.2%, 2% and 0.7%, respectively (Figure 1). [2] The serious delinquency rate decreased for all loan types in October 2023 compared with a year prior, when COVID-related delinquencies still lingered.
In October, the serious mortgage delinquency rate for FHA loans dipped by 1.4 percentage points year over year. VA loan delinquencies dropped by 0.5 percentage points, while conventional loan rates decreased by 0.1 percentage points.
Data shows that the serious delinquency rate for FHA loans was almost five times higher than the serious delinquency rate for conventional loans. However, the serious delinquency rate for FHA loans has historically been higher compared with other mortgage types.
The serious mortgage delinquency rates for overall, conventional and FHA loans were lower in October 2023 than before the pandemic. However, the serious delinquency rate for VA loans was still slightly higher than the pre-pandemic level. The serious delinquency numbers for FHA and VA loans reached a high in November 2020 that surpassed even the peak seen after the Great Recession. By contrast, the serious delinquency rate for FHA and VA loans dipped to lows in May 2019 and March 2020, respectively.
Homeowners with FHA loans are more likely to be low-to-moderate income workers, and the pandemic had a greater impact on these borrowers compared with those with conventional loans. Also, part of this trend could be the rise of FHA-to-conventional refinancing since 2013, which has transferred many current FHA loans into the conventional servicing book and has left higher-risk FHA loans outstanding. FHA-to-conventional refinances accounted for about 11% of all refinances in 2022, compared with just 2% in 2012 and 8% in 2019, according to CoreLogic public records data. However, FHA-to-conventional refinances dropped to 6% in 2023.
The historically low U.S. mortgage delinquency rate clearly shows that most U.S. homeowners can currently afford their monthly payments, as many borrowers have low interest rates already locked in. [3] Strong job growth has helped borrowers stay current on their mortgages, while home equity gains are helping to create a future financial buffer for homeowners.
CoreLogic’s Loan Performance Insights report, generally released on the last Thursday of each month, tracks mortgage delinquencies and foreclosures on a national, state and metro level. CoreLogic’s Office of the Chief Economist regularly weighs in on the latest housing market conditions, and you can always find their insights here.
[1] Serious delinquency is defined as 90 days or more past due or in foreclosure proceedings. The serious delinquency rate is the percentage of all loans in a state of serious delinquency.
[2] This analysis is based on the CoreLogic TrueStandings servicing. The CARES Act provided forbearance for borrowers with federally backed mortgage loans who were economically impacted by the pandemic. Borrowers in a forbearance program who have missed a mortgage payment are included in the CoreLogic delinquency statistics, even if the loan servicer has not reported the loan as delinquent to credit repositories.
[3] The average mortgage rate on outstanding mortgage debt is 3.7%.
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