Mortgage delinquencies declined slightly. Are homeowner tensions easing?

In second-quarter 2024, high home prices and soaring mortgage rates caused more homeowners to struggle with their loan payments. But data shows a slight recovery as mortgage delinquencies fell in the third quarter.

That silver lining comes from the Mortgage Bankers Association (MBA)’s National Delinquency Survey. According to the MBA, the seasonally adjusted rate for residential property (one- to four-unit) delinquencies dropped to 3.92% at the end of September. That’s down from 3.97% at the end of June, but it is up 30 basis points from one year ago. Delinquency rates include loans at least 30 days past due.

The quarterly survey reviews late-payment and foreclosure rates based on loan type, geographical information and demographic data. MBA uses the survey to track and forecast mortgage performance trends in the housing market. Surveyed loan types include Federal Housing Administration (FHA) loans, U.S. Department of Veterans Affairs (VA) loans and conventional loans.

FHA loans had the largest delinquency rate decrease in the third quarter, falling by 14 basis bps to 10.46%. The rate for VA loans declined by 5 bps to 4.58% and the rate for conventional loans shed 1 bps to 2.63%.

Year over year, delinquency rates for all loan types increased, with FHA loans rising by 96 bps, VA loans by 82 bps and conventional loans by 13 bps.

MBA also reported that 30-day delinquencies saw the largest decrease during the quarterly, dropping by 14 bps to 2.12% of all loans. The 60-day delinquency share declined by 3 bps to 0.73%, with the 90-day-late rate falling 7 bps to 1.08%.

According to Marina Walsh, MBA’s vice president of industry analysis, lenders and consumers should remain cautious heading into Q4 2024.

“Mortgage delinquencies have inched up over the past year,” Walsh said in a statement. “Even though there was a small, third-quarter decline in the overall delinquency rate compared to the previous quarter, this was driven by a decrease in 30-day delinquencies. Later-stage delinquencies rose last quarter, and overall delinquencies were up thirty basis points from one year ago.”

The share of loans in foreclosure — calculated separately — rose to 0.45%, up slightly on a quarterly and yearly basis.

Geographically, the five states with the largest delinquency rate increases during the quarter included Texas (+24 bps), Arkansas (+14 bps), Florida (+13 bps), Arizona (+12 bps) and Wyoming (+9 bps).

Declining delinquency rates could indicate that homeowners are gradually recovering from tough market conditions caused by high mortgage rates and other factors. But the MBA noted that going into Q4 2024, the impacts of hurricanes Helene and Milton are likely to effect the results of the next survey in the Southeast.