Mortgage Delinquencies Remain Very Low

Home Mortgage Delinquencies Remain Very Low

The newly released National Delinquency Survey by the Mortgage Bankers Association’s (MBA) showed that that delinquent mortgage payments were down by 41 basis points compared to a year ago.

The delinquency rate for mortgage loans on one- to four-unit residential properties rose to a seasonally adjusted rate of 4.47% of all loans outstanding at the end of the third quarter. The rate was up 11 basis points from the previous quarter but down 41 basis points from one year ago.

“The healthy economy is overall supporting low mortgage delinquencies and foreclosure inventories,” said Marina Walsh, vice president of industry analysis at MBA. “Unemployment is at its lowest level since 1969, wages have grown 3.1% year-over-year – the biggest jump in almost a decade – and job growth is averaging over 212,000 jobs per month thus far.”

Meanwhile, foreclosure actions were started on just 0.23% of loans during the quarter, a one-basis-point drop from the last quarter to its lowest level since the fourth quarter of 1985.

Walsh noted that natural disasters are a major factor in determining whether borrowers make timely mortgage payments, adding that it will likely take several quarters for the effects of the most recent storms on the survey results to dissipate.

MBA noted that significant delinquency increases were recorded in states adversely impacted by Hurricane Florence and Tropical Storm Gordon, including North Carolina, South Carolina, Mississippi, Arkansas, and Alabama.

“The impact of the August and September 2017 hurricanes on several states, particularly Texas and Florida, continues to retreat,” Walsh said. “Primarily because of the declining effects of last fall’s hurricane-related spike, the overall mortgage delinquency rate in the third quarter was down 41 basis points on a year-over-year basis.”

What Happened to Rates Last Week?

Mortgage backed securities (FNMA 4.50 MBS) lost just  -7 basis points (BPS) from last Friday’s close which caused fixed mortgage rates to remain at their their highest levels of 2018.

Overview:  We had three big events that shaped rates last week:  Election results, the Fed and Inflation.  Inflation has reared its ugly head with PPI at 3.3% in China and 2.9% in the U.S. As a refresher – inflation is Kryptonite to bonds and MBS sold off on Friday as a result. The election results were largely what the markets expected with the Senate remaining with the Republicans and the Democrats taking the house.  We would have seen a lot more volatility if either party won both. The Federal Reserve also did not surprise the markets with setting the stage for a rate hike at their December meeting.

The Talking Fed:
 The FOMC voted unanimously to keep rates unchanged at this meeting. The Fed seems largely unconcerned with the recent stock market volatility and is signaling “further gradual rate increases ahead” which did nothing to change market expectations for a rate hike in December.

Inflation Nation:
 The Producer Price Index data for October surged to their highest levels in 6 years. The Headline PPI YOY jumped by 2.9% vs est of 2.5% and the Core (ex food and energy) YOY PPI increased by 2.6% vs est of 2.3%. Margins in Machinery, equipment, parts and wholesale supplies saw a large rise.

The Republicans picked up a couple of more seats in the Senate to maintain their majority and the Democrats picked up enough seats to claim the house but the house is still fairly evenly split 220 to 193.

What to Watch Out For This Week:

The above are the major economic reports that will hit the market this week. They each have the ability to affect the pricing of Mortgage Backed Securities and therefore, interest rates for Government and Conventional mortgages. I will be watching these reports closely for you and let you know if there are any big surprises.

It is virtually impossible for you to keep track of what is going on with the economy and other events that can impact the housing and mortgage markets.  Just leave it to me, I monitor the live trading of Mortgage Backed Securities which are the only thing government and conventional mortgage rates are based upon.