Fannie and Freddie: Single-Family Mortgage Delinquency Rate Declined, Multi-Family Increased in June

CoreLogic: Mortgage Delinquency Rate Drops to All-Time Low in May

I’ve argued that there would not be a huge wave of single-family foreclosures this cycle since lending standards have been solid and most homeowners have substantial equity. That means we will not see cascading price declines like following the housing bubble. This is a high confidence prediction and is supported by the following data.

However, there is some concern about some multi-family properties.

Fannie and Freddie Serious Delinquencies Declined in June

Single-family serious delinquencies continued to decline in June, however, multi-family serious delinquencies are now increasing.

Freddie Mac reported that the Single-Family serious delinquency rate in June was 0.56%, down from 0.58% May. Freddie's rate is down year-over-year from 0.76% in May 2022.  This is now below the pre-pandemic lows of 0.60%. Freddie's serious delinquency rate peaked in February 2010 at 4.20% following the housing bubble and peaked at 3.17% in August 2020 during the pandemic.

Fannie Mae reported that the Single-Family Serious Delinquency decreased to 0.55% in June from 0.56% in May. The serious delinquency rate is down from 0.81% in June 2022.  This is also below the pre-pandemic lows of 0.65%. The Fannie Mae serious delinquency rate peaked in February 2010 at 5.59% following the housing bubble and peaked at 3.32% in August 2020 during the pandemic.

These are mortgage loans that are "three monthly payments or more past due or in foreclosure". Mortgages in forbearance are being counted as delinquent in this monthly report but are not reported to the credit bureaus.

For Fannie, by vintage, for loans made in 2004 or earlier (1% of portfolio), 1.82% are seriously delinquent (down from 1.85% in May). 

For loans made in 2005 through 2008 (1% of portfolio), 2.86% are seriously delinquent (down from 2.95%).

For recent loans, originated in 2009 through 2023 (98% of portfolio), 0.45% are seriously delinquent (down from 0.46%). So, Fannie is still working through a handful of poor performing loans from the bubble years.

Multi-Family Delinquencies Increased

Freddie Mac reports that multi-family delinquencies increased to 0.21% in June, up from 0.07% in June 2022.

This graph shows the Freddie multi-family serious delinquency rate since 2012. Rates were still high in 2012 following the housing bust and financial crisis.

The multi-family rate increased following the pandemic and has increased recently as rent growth has slowed, vacancy rates have increased, lending has tightened, and interest rates have increased sharply. This will be something to watch as rents soften.

US Mortgage Delinquency Rate Drops to All-Time Low in May, CoreLogic Reports

From CoreLogic: US Mortgage Delinquency Rate Drops to All-Time Low in May

For the month of May, 2.6% of all mortgages in the U.S. were in some stage of delinquency (30 days or more past due, including those in foreclosure), representing a 0.1 percentage point decrease compared with 2.7% in May 2022 and a 0.2 percentage point decrease compared with 2.8% in April 2023.

To gain a complete view of the mortgage market and loan performance health, CoreLogic examines all stages of delinquency. In May 2023, the U.S. delinquency and transition rates and their year-over-year changes, were as follows:

•Early-Stage Delinquencies (30 to 59 days past due): 1.3%, up from 1.1% in May 2022

•Adverse Delinquency (60 to 89 days past due): 0.4%, up from 0.3% in May 2022.

•Serious Delinquency (90 days or more past due, including loans in foreclosure): 1%, down from 1.3% in May 2022 and a high of 4.3% in August 2020.

•Foreclosure Inventory Rate (the share of mortgages in some stage of the foreclosure process): 0.3%, unchanged from May 2022.

•Transition Rate (the share of mortgages that transitioned from current to 30 days past due): 0.6%, unchanged from May 2022.

The U.S. overall mortgage delinquency rate again fell to a historic low in May, returning to the level seen in March of this year, while the near-all-time low foreclosure rate has not changed since spring 2022. …

“May’s overall mortgage delinquency rate matched the all-time low, and serious delinquencies followed suit,” said Molly Boesel, principal economist at CoreLogic. “Furthermore, the rate of mortgages that were six months or more past due, a measure that ballooned in 2021, has receded to a level last observed in March 2020.“

There will not be a foreclosure crisis this time.