Fannie and Freddie: Single-Family Mortgage Delinquency Rate Mostly Unchanged in September

CoreLogic: US Serious Mortgage Delinquency Rate Drops to All-Time Low in August

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. Delinquencies are a trailing indicator but are something to watch.

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

Fannie and Freddie Serious Delinquencies Mostly Unchanged in September

Freddie Mac reported that the Single-Family serious delinquency rate in September was 0.55%, unchanged from 0.55% August. Freddie's rate is down year-over-year from 0.67% in September 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 increased to 0.54% in September from 0.53% in August. The serious delinquency rate is down from 0.69% in September 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), 1.74% are seriously delinquent (unchanged from 1.74% in August). 

For loans made in 2005 through 2008 (1% of portfolio), 2.68% are seriously delinquent (down from 2.72%).

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

Multi-Family Delinquencies Decreased Slightly

Freddie Mac reports that multi-family delinquencies decreased to 0.24% in September, down from 0.25% in August. This was up from 0.13% in September 2022.

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

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

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

From CoreLogic: US Serious Mortgage Delinquency Rate Drops to All-Time Low in August, CoreLogic Reports

In August 2023, 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 0.2 percentage point decrease compared with 2.8% in August 2022 and a 0.1 percentage point decrease from July 2023.

To gain a complete view of the mortgage market and loan performance health, CoreLogic examines all stages of delinquency. In August 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 1.2% in August 2022.

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

• Serious Delinquency (90 days or more past due, including loans in foreclosure): 0.9%, down from 1.2% in August 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 August 2022.

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

The share of U.S. mortgages that fell into serious delinquency — representing borrowers who are three months late on payments — dropped to the lowest level in nearly 25 years in August, at 0.9%. Nationwide, overall mortgage delinquencies (2.6%) and foreclosures (0.3%) also remained near historic lows, a clear sign that most U.S. homeowners can currently cover their monthly payments. But as interest rates have approached 8% in October, more prospective buyers could be sidelined, a factor that makes timing the housing market crucial to building long-term wealth.

“U.S. mortgage performance remained strong in August, supported by a robust job market and a healthy economy,” said Molly Boesel, principal economist at CoreLogic. “However, this thriving job market comes at a time when interest rates are quickly rising, which is keeping many potential homebuyers from being able to secure a mortgage.”

Delinquencies are a trailing indicator, but there will not be a residential foreclosure crisis this cycle.