The Mortgage Bankers Association (MBA) National Delinquency Survey showed mortgage delinquencies decreased in the second quarter of 2021 for one-to-four-unit residential properties.

For purposes of the survey, and to take mortgages in COVID-19 forbearance into account, the organization asked servicers to report loans in forbearance as delinquent if the payment was not made on the original terms of the mortgage.

“Mortgage delinquencies across all loan types – conventional, FHA, and VA – reached their lowest levels since the first quarter of 2020,” Marina Walsh, MBA vice president of industry analysis, said in a release. “The drop in the delinquency rate for FHA loans and VA loans was the largest quarterly decline for both in the history of MBA’s survey dating back to 1979.”

The delinquency rate dropped to a seasonally adjusted rate of 5.47 percent of all loans outstanding at the end of the second quarter of 2021. It was down 91 basis points compared with the prior quarter, and down 275 basis points compared with the year before. 

Compared with the first quarter of 2021, the seasonally adjusted mortgage delinquency rate decreased for all outstanding loans, MBA stated. The 30-day delinquency decreased 5 basis points to 1.41 percent, the 60-day delinquency rates decreased 15 basis points to 0.52 percent, and the 90-day delinquency rate decreased 72 basis points to 3.53 percent. Both the 30-day delinquency rate and 60-day delinquency rate are at the lowest levels in the history of the survey.

Conventional loan delinquencies decreased 68 basis points quarter-over-quarter to 3.89 percent, Federal Housing Administration (FHA) loan delinquencies decreased 190 basis points to 12.77 percent, and the Veterans Affairs (VA) loan delinquencies decreased by 115 basis points to 6.47 percent. These are the lowest these delinquency rates have reached since the first quarter of 2020.

On a year-over-year basis, mortgage delinquencies saw a decrease of 279 basis points for conventional loans, a decrease of 288 basis points for FHA loans, and a decrease of 158 basis points for VA loans.

“Much of the second-quarter improvement can be traced to later-stage delinquent loans – those 90 days or past due, but not in foreclosure,” Walsh said. “It appears that borrowers in later stages of delinquency are recovering due to several factors, including improved employment and other economic conditions, the availability of home retention workout options after forbearance, and a strong housing market that is bringing additional alternatives to distressed homeowners.”

The delinquency rate includes loans that are at least one payment past due but does not include loans in the process of foreclosure, the MBA stated. The percentage of loans in the foreclosure process was 0.51 percent at the end of the second quarter of 2021, down 3 basis points from the first quarter of 2021 and 17 basis points lower than one year ago. This is the lowest foreclosure inventory rate since the fourth quarter of 1981. The percentage of loans on which foreclosure actions were started in the second quarter was 0.04 percent, unchanged from the prior quarter.

“Once the foreclosure moratoria lift, and forbearance plans expire over the course of the next several months, we expect many homeowners to take advantage of available workout options to avoid the foreclosure process,” Walsh added.

The five states with the largest decreases in their overall delinquency rate from last quarter were Hawaii (81 basis points), New Jersey (85 basis points), Florida (94 basis points), Nevada (105 basis points), and Idaho (152 basis points).