While today's rising mortgage rates are nominally good for servicers, the underlying cause for the current increase is inflation and its impact on American's pocketbooks. In turn, it could lead to increased delinquency rates.

Both Freddie Mac and the Mortgage Bankers Association most recent survey releases put conforming rates over 7%. If current trends hold, they could remain over this mark as the benchmark 10-year Treasury yield, one of the components used in pricing mortgages, ended the week at 5.18%, 18 basis points higher than the Sept. 18 close.

In the past, commentators have noted inflation can impact ability to repay, especially among first-time homeowners.

How GSE mortgages performed in the second quarter

On the agency side of mortgage performance, the short-term bucket had the largest growth, 13 basis points quarter-to-quarter.

Otherwise, it looks to be so far, so good, as 60-day delinquency rates are 2 basis points higher in the second quarter versus the first quarter, while serious delinquencies are flat, the latest Federal Housing Finance Agency foreclosure prevention report said.

But for the non-agency securitization sector, Fitch Ratings found that as of the August remittance date, it continues to find an uptick in both 30 day-plus and serious delinquencies across nearly all sectors, except non-qualified mortgages.

According to the FHFA report, the rate increase was the largest in the most recent bucket, loans with payments 30-to-59 days late. The second quarter had a 105 basis point rate, an increase of 13 basis points from the prior three-month period of 92 basis points.

Delinquencies of 60 days or longer across the Fannie Mae and Freddie Mac portfolios ended the second quarter at 83 basis points, up from 81 basis points three months prior and 76 basis points from the same period in 2025.

Serious delinquencies remained at 59 basis points quarter-to-quarter but were 5 basis points higher than the second quarter of last year.

FHFA provided comparative data showing the serious delinquency rates are much lower for conforming loans than government products. The Federal Housing Administration program has a 6.07% rate, while Veterans Affairs reports 2.62%, and an industry average of 2.06%.

For last year's second quarter, the serious delinquency rate for FHA was 3.8% and 2.31% for VA) loans. The industry average for all mortgages was 1.57%.

Meanwhile, Fannie Mae and Freddie Mac reported foreclosure starts increasing 1.9% to 25,908 while third-party and foreclosure sales rose 4.1% to 3,894 in the second quarter from three months' prior.

How many foreclosures were prevented in the second quarter

The number of foreclosure prevention actions taken remained on the downswing. They completed 48,239 of all types in the second quarter, versus 58,317 for the first quarter and 54,750 one year ago.

But on a quarter-to quarter basis, loan modifications completed rose to 21,175 from 20,719. This was more than offset by the drop-off in forbearance plans to 6,911 from 11,949; payment deferrals fell to 15,663 from 20,964.

Home forfeitures grew to 404 from 313.

Private-label MBS delinquencies mostly rise in August

Meanwhile, Fitch broke out delinquency rates among private-label MBS by type for August.

"In particular, the non-qualified mortgage/non-prime sector has experienced elevated delinquencies relative to historical averages," Fitch said in its report. However, while it had the highest 30-day late rate at 5.02%, this was still 27 basis points improved over August 2025.

For this category, the 90-day-plus rate of 2.33% was 10 basis points lower year-over-year.

"Despite this modest sector-wide improvement, the 2023 and 2024 vintages remain the primary drag on performance, with 30-day-plus rates of 10.53% (up 275 basis points) and 6.14% (up 277 basis points), respectively," Fitch said. The serious delinquent rates were at 5.85%, 187 basis points higher, and 2.93%, a 185 basis point gain.

"Early 2025 originations have followed a similar trajectory, with 12-month seasoned loans showing a 3.28% 30-day delinquency rate compared to 3.72% for equivalently seasoned 2024 vintage loans," the Fitch report said.

For prime jumbo MBS, these loans have a 1.08% delinquency rate, up 15 basis points from August 2025. The 90 day or longer rate of 45 basis points is 5 basis points higher.

Recent vintages are a source of concern to Fitch. Issuances from 2023 continue to underperform relative to peers, with an average 30-day delinquency rate of 2.21% (up 83 basis points). This is "still the weakest cohort within the sector," the report said. "The 2024 vintage is exhibiting a comparable pattern of weakness."

Home equity mortgage performance slips in August

For closed-end seconds in securitizations, this sector has seen notable growth, accompanied by a widening of credit boxes across newly issued collateral, Fitch said. The current delinquency rate is up 87 basis points from a year ago, at 1.8%.

Meanwhile, the rating agency warned that volatility persists with home equity line of credits in private-label securitizations.

This category has a 30-day rate of 2.11% for August, up 33 basis points from a year ago. "While month-to-month performance continues to show volatility, the broader trend has fluctuated since the second half of 2025," Fitch said.

The rating agency added the 90-day delinquency rate rose to 0.79% (up 31 basis points), "with weakening observed across all vintages over the past six months."