Early-stage defaults push national delinquency rate above 3%

Early-stage delinquencies picked up in November month to month, but the volume of more seriously distressed loans only moved marginally, according to data from Black Knight. 

Approximately 1.6 million homeowners were more than 30 days past due on their mortgages, leading to a national delinquency rate of just over 3%, the mortgage technology and data provider said. The number represented a 3.5% increase from October's total. Thirty-day delinquencies moved up by 3.9%, while loans 60 or more days late saw an 11% surge. 

Meanwhile the number of seriously delinquent borrowers, 90 days late or more but not yet in foreclosure, dropped by just 0.2% to 550,000. While the flattening could indicate many homeowners are resuming payments before their loans hit the seriously delinquent point, the lack of noticeable improvement might also mean those already struggling are finding little relief.   

Factors impacting the rise in earlier-stage numbers include residual financial pressures following Hurricane Ian in September. The delinquency rate in Florida increased 18 basis points between October and November to 3.6%, Black Knight said. Long-term unemployment has also seen a small uptick since July, but has come in flat in the prior two months. 

Macroeconomic worries, though, will likely be top of mind among servicers and borrowers as 2023 arrives. A weaker employment picture is expected next year by many economists, as inflation concerns linger. At the same time, several research groups are also predicting a recession at some point in the coming year. 

"I think as an industry — everybody's watching — is there a recession ahead which could drive delinquencies up?" said Adam Saab, vice president head of early stage default at mortgage subservicer Cenlar, in a recent interview with National Mortgage News. 

"We start looking for some of those key attributes that say there might be some change that's looming," he said.

Foreclosure starts also saw a significant monthly surge of 19.4% to 23,400 in November, but still came in 30% below pre-pandemic levels. November's total was also less than its recent high recorded in June, but stood 532% higher compared to the same month in 2021, when many homeowners were still protected or just emerging from national or local foreclosure moratoria. 

The number of properties in the foreclosure pre-sale inventory totaled approximately 196,000, climbing 5.3% from the prior month.

On the other hand, in what many would see as a positive for servicers, the rate of mortgage prepayment activity fell for a third straight month to a single-month mortality rate of 0.4%. Compared with October, prepayments dropped by 15.6%.