Mortgage performance improvement could be reaching an inflection point as continued slowing in the annual pace of change might mean delinquency rates are near cycle lows, Black Knight said.
August's rate of 3.17% was 4 basis points lower than July's 3.21%, but this was higher than 2.79% one year ago.
But that current delinquency rate is still a full percentage point lower than the average for August between 2015 and 2019, the Black Knight first look report noted.
Black Knight noted concern that the year-over-year improvement in August was just 0.77% — but in January 2022, it was over 43%.
This slowing "suggests delinquency rates may be nearing cycle lows," Black Knight noted in its press release.
While serious delinquencies are on the decline, those less than 89 days late have picked up. In August, this group had 1.236 million units that hadn't made a payment, versus 1.232 million units in July. The 30-day and 60-day buckets grew by about 2,000 homes each.
Serious delinquencies, those more than 90 days since a payment had been made, totaled 448,000 units in August; in July, it was 468,000 units. This is the lowest since June 2006, Black Knight pointed out.
Including foreclosures, 1.899 million properties were not current on their mortgage in August, compared with 1.919 million in July.
But this was up from 1.674 million for August 2022. The number of loans in active foreclosure, 215,000, was the lowest since March 2022, when the pandemic moratoria expired. Foreclosure starts on the other hand, increased over 21% from July to 31,900 homes.
Future loan performance is tough to predict because of unprecedented government economic policy intervention, Fannie Mae Chief Economist Doug Duncan said. In the past, a correlation has been made between mortgage delinquencies and unemployment.
The most recent Bureau of Labor Statistics data found the United States added 187,000 jobs in August as compared with a downwardly revised 157,000 the previous month.
Employment is one of the factors the Federal Open Market Committee is using to determine whether or not to raise short-term rates.
The top three states in terms of delinquencies are all on the Gulf Coast. Mississippi had the highest percentage in August at 7.58%, with Louisiana at 7.08% and Alabama at 5.31%.
They are also the top states for serious delinquencies, with Mississippi at 2.12%; Louisiana, 1.7%; and Alabama, 1.43%.
Prepayment speeds, a regular feature in this Black Knight report, increased slightly, to 53 basis points in August from 50 in July.
