Mortgage delinquencies rise as economy stumbles

Mortgage delinquencies increased in the fourth quarter from their record lows as borrowers became susceptible to a sinking U.S. economy, the Mortgage Bankers Association said.

Its National Delinquency Survey reported 3.96% of all outstanding mortgages on a seasonally adjusted basis were not current on their payments in the three months ended Dec. 31, 2022. This was up 51 basis points from the all-time low of 3.45% reported in the third quarter.

However, the delinquency rate was 69 basis points lower than that of the fourth quarter of 2021, 4.65%.

The quarter-to-quarter increase was expected because of the changed conditions, said Marina Walsh, the MBA's vice president of industry analysis.

"The weaker economy and ongoing inflationary pressures contributed to the uptick in delinquencies," Walsh said in a press release. "Notwithstanding the fourth-quarter increase in mortgage delinquencies, the foreclosure starts rate of 0.14% was well below the historical quarterly average of 0.40%."

Foreclosure starts fell by one basis point from the third quarter's 0.15%.

Notwithstanding the drop in foreclosure starts, delinquencies increased all along the timeline. The share of borrowers at least 30 days in arrears increased 26 basis points compared with the third quarter to 1.92%. The 60-day late payment rate rose 13 basis points to 0.66%, and those who had not paid for a minimum of 90 days grew to 1.38%, up 11 basis points.

Even though starts were down, the share of loans already in foreclosure rose 1 basis point from the third quarter and 15 basis points compared with the fourth quarter of 2021 to 0.57%.

Unemployment historically has been correlated with delinquency trends. Even though the unemployment rate fell to 3.4% for January, the MBA expects that to rise to 5.2% by the end of the year as hiring slows. That means going forward in 2023, late payments should increase, it said.