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

CoreLogic: US Mortgage Performance Remains Exceptionally Strong in July

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 Declined in August

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

Freddie Mac reported that the Single-Family serious delinquency rate in August was 0.55%, down from 0.56% July. Freddie's rate is down year-over-year from 0.70% in August 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 0.53% in August from 0.54% in July. The serious delinquency rate is down from 0.72% in August 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 (down from 1.78% in July). 

For loans made in 2005 through 2008 (1% of portfolio), 2.72% are seriously delinquent (down from 2.82%).

For recent loans, originated in 2009 through 2023 (98% of portfolio), 0.45% are seriously delinquent (same as 0.45% in July). 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 0.25% in August, up from 0.12% in August 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 Mortgage Delinquency Rate Increased Slightly in July, CoreLogic Reports

From CoreLogic: CoreLogic: US Mortgage Performance Remains Exceptionally Strong in July

For the month of July, 2.7% 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 0.3 percentage point decrease compared with 3% in July 2022 and a 0.1% increase from June 2023.

To gain a complete view of the mortgage market and loan performance health, CoreLogic examines all stages of delinquency. In July 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%, unchanged from July 2022.

• Adverse Delinquency (60 to 89 days past due): 0.4%, unchanged from July 2022.

• Serious Delinquency (90 days or more past due, including loans in foreclosure): 1%, down from 1.3% in July 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 July 2022.

• Transition Rate (the share of mortgages that transitioned from current to 30 days past due): 0.7%, unchanged from July 2022.

U.S. mortgage performance held strong in July, with both overall delinquency and foreclosure rates still hovering near record lows. Only Idaho saw overall delinquencies rise year over year, but rates in that state remain very low. Meanwhile 16 metro areas posted slight annual delinquency upticks, a drop from the previous month, when 31 metros posted increases. With hurricane season in full swing in the late summer and early fall, some areas of the U.S. could see typical seasonal delinquencies rise later this year and into 2024.

“Overall U.S. mortgage delinquencies remained near a record low in July, with the share of homes entering that status or progressing to later stages either unchanged or lower,” said Molly Boesel, principal economist for CoreLogic. “Since most borrowers have substantial amounts of home equity, those who have locked in low mortgage rates that do enter later stages of delinquency will most likely not experience foreclosures.”

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