Mortgage delinquency rates saw a slight uptick over the past year, but the performance of loans varied significantly depending on the type, according to the latest report by the Mortgage Bankers Association (MBA). The report highlights how loans backed by the Federal Housing Administration (FHA) and the U.S. Department of Veterans Affairs (VA) are showing increased signs of stress.
A Closer Look at Loan Performance
Marina Walsh, MBA’s vice president of industry analysis, noted that FHA and VA loans were increasingly “roll-to-later stages of delinquency,” signaling potential financial challenges for borrowers utilizing these programs. While conventional loans remain relatively stable, FHA and VA loans are experiencing a more noticeable impact.
In detail, seriously delinquent loans—defined as loans that are at least 90 days past due—rose by 70 basis points for FHA loans and 57 basis points for VA loans over the past year. In contrast, conventional loans only saw a slight increase of 2 basis points.
In aggregate, the seasonally adjusted serious delinquency rate reached 1.19% in the final quarter of the year. The overall delinquency rate increased by 6 basis points over the quarter to 3.98%, a 10-basis-point rise compared to the previous year.
Conventional Loans: Stability Amid Rising Delinquencies
Despite the overall increase, Walsh pointed out that "conventional delinquencies remain near historical lows." However, the gap between FHA, VA, and conventional loans is widening.
The difference in delinquency rates underscores the ongoing challenges faced by government-backed loan programs. The spread between FHA and conventional loan delinquencies reached 841 basis points, while the VA and conventional loan delinquency gap stood at 208 basis points.
Delinquency Rates by Loan Type
Conventional Loans: 2.62%
FHA Loans: 11.03%
VA Loans: 4.7%
These figures reflect a growing disparity between loan types, emphasizing the need for borrowers to understand the risks and benefits of various mortgage programs.
Factors Contributing to Higher Delinquencies
Walsh highlighted several factors that could be driving the increase in delinquencies among FHA and VA loans. While the labor market remains strong, external risks persist, including:
Rising inflation
Decreasing personal savings rates
Natural disasters
Increasing consumer debt levels
Higher tax and insurance payments
These challenges may disproportionately affect borrowers relying on FHA and VA loans, making it essential for homebuyers to evaluate their financial stability before committing to a mortgage.
Regional Differences in Delinquency Rates
Certain states experienced more pronounced increases in their overall delinquency rates. States with the largest quarterly increases include:
Florida: +99 basis points
South Carolina: +59 basis points
North Carolina: +40 basis points
Georgia: +39 basis points
Louisiana: +32 basis points
ReadySetLoan: Your Partner in Navigating Mortgage Programs
Understanding the differences in loan performance and selecting the right mortgage program can be overwhelming. That’s where ReadySetLoan comes in as your educational partner and resource guide. Whether you’re considering an FHA, VA, or conventional loan, we provide the insights you need to make informed decisions.
If you’re concerned about your mortgage options or want to learn how to protect your financial future, ReadySetLoan is here to help. Contact us today to explore tailored advice and solutions.
Stay on top of your homeownership journey with ReadySetLoan, your go-to resource for navigating the mortgage process.
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