FHA Mortgages

VA, FHA mortgage delinquencies posted steepest drop in 40+ years throughout 2Q

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Seasonally adjusted defaults on certain government insured or guaranteed home loans saw the largest drop in the Mortgage Bankers Association’s history in the second quarter, as defaulted payments saw wider declines.

The decline in the following quarter to 12.77% from 14.67% in the Federal Housing Administration insured loans and 6.47% from 7.62% in the Veterans Department guaranteed mortgage loans occurred as the total defaults of 6.38 % fell to 5.47%, marking an unseen low since the first quarter of last year.

As with FHA and VA loans, mortgages delayed 90 days or more saw a record decline, falling 72 basis points to 3.53% between the first and second quarters. A year ago, the seasonally adjusted total default rate for the second quarter was 8.22%. The equivalents for FHA and VA loans were 15.65% and 8.05%, respectively.

The fact that even loans with higher pandemic distress or longer-term hardship have seen significant declines reinforces other indicators that suggest that the market could normalize if infection rates remain contained.

“It appears that borrowers recover in the later stages of insolvency due to a number of factors including improved employment and other economic conditions, the availability of options to maintain housing after deferral, and a strong housing market that provides additional alternatives for homeowners in need.” said Marina Walsh, Vice President of Industry Analysis for the MBA, in a press release.

All loans on which the borrower did not make payment as contractually agreed, including deferred mortgages, were treated as default for the purposes of this survey. Foreclosures were excluded from default rates. The association has been tracking crime rates since 1979.

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