Delinquencies Decline But Remain High Relative to 2000s

Delinquent Notice BHThe Urban Institute’s Housing Finance Policy Centerrecently published its September 2016 Chartbook, noting in particular that serious delinquencies and foreclosures continue to decline with the housing recovery, but remain quite high relative to the early 2000s.

In particular, the chartbook notes that loans 90 days delinquent or in foreclosure totaled 3.1 percent in the second quarter of 2016. This was a decrease of 9 basis points from 4.0 percent for the same quarter a year earlier. Additionally, serious delinquency rates of GSE loans were reported to continue to decline as the legacy portfolio is resolved and the post-2009 book of business exhibits very low default rates. As of July 2016, the chartbook states that 1.30 percent of the Fannie portfolio and 1.11 percent of the Freddie portfolio were seriously delinquent. This was down from 1.63 percent for Fannie and 1.48 percent for Freddie in July 2015.

Likewise, it was reported that serious delinquencies for FHA and GSE single-family loans continue to decline. More specifically, it is noted that GSE delinquencies remain higher relative to 2005-2007, while FHA delinquencies, which are much higher than their GSE counterparts, are now at levels similar to 2005-2007. The chartbook also shows that GSE multifamily delinquencies have declined to pre-crisis levels, although they did not reach problematic levels even in the worst years of the crisis.

In addition to the delinquencies, the chartbook also reports that in Q2 2016, the number of active permanent modifications continued to fall by 1,928 mortgages. This was the third consecutive quarter with a decline since Q4 2015. Urban Institute says that there are three factors behind this change which include fewer new permanent modifications made, some modifications failing because the borrowers did not make their payments, and a small number of borrowers either paying off their mortgage or withdrawing their application. The chartbook shows that as a result, active permanent modifications declined to 0.98 million.

In this regard, total modifications (HAMP and proprietary) are now approximately equal to total liquidations. The chartbook refers to data from Hope Now that reflects that 7,951,631 borrowers have received a modification since Q3 2007, compared with 8,156,258 liquidations in the same period. The report states that modification activity slowed significantly in 2014 and has continued to do so, averaging 31,178 in the first six months of 2016. And furthermore, liquidations have also continued to decline, averaging 34,356 per month in the first six months of 2016 compared to 37,970 per month in the same period a year ago.

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