More than a decade after a spike in real estate delinquencies helped cause the Great Recession, the national mortgage delinquency rate has dropped to its lowest level in 18 years, Mortgage Bankers Association data from the most recent quarter showed.
"What's even more noteworthy [is that] the delinquency rate dropped from the previous quarter and on a year-over-year basis across all loan types and stages of delinquency," said Marina Walsh, vice president of industry analysis at MBA.
The percentage of delinquencies among all residential mortgages on properties with four units or less dropped to a seasonally adjusted 4.06% during the fourth quarter of 2018. (The delinquency rate includes loans that are at least one payment past due, but not those in the process of foreclosure.)
Walsh attributed the improvement to low unemployment, wage growth and a low household debt level relative to disposable income.
She also noted that delinquency rates even fell in states impacted by natural disasters in the past two years, including Florida, Texas and Mississippi.
A deeper look at the data shows that borrowers with conventional mortgages were least likely of the main subcategories to be behind on their loans, with a delinquency rate of 3.19%. Among those with VA loans, the rate was 3.71%.
Holders of FHA mortgages — who tend to have lower credit scores and make smaller down payments — had a delinquency rate of 8.65%. But as the Washington Post noted, this was well off a level of about 14% a decade earlier.
Even the rate for mortgages that were seriously delinquent (90 or more days overdue or in foreclosure) fell to 2.06%.
The improvement in timely mortgage payments complements data from the St. Louis Federal Reserve Bank, which showed U.S. homeowners’ collective home equity rose to a record $15.36 trillion in the third quarter of last year.
But while home loan delinquency rates continued to ease, the proportion of seriously delinquent student loans climbed to a record high at of the end of 2018.
Bloomberg interest-rate strategist Ira Jersey attributed the problem in the student loan space to weakness in college graduates’ incomes.