Standard Default Rates for All Types of Mortgages Continue to Fall

The average crime rate is lower than the epidemic; however, the rates for FHA and VA are slightly higher

The total number of mortgages in the country has increased significantly in the past year, according to news reports. CoreLogic Loan Performance Insights Report. The data shows that the crime rate for October 2022 fell by one percent from the previous 12 months of 1.2%.(1) Compared to the high delinquency rate for mortgages in August 2020, the rate in October dropped to three percent, which was largely due to strong labor market conditions since reopening. the American economy. Although defaults have decreased for all types of mortgages over the past two years, it is important to look at trends by loan type as some loans are more sensitive to changes in the economic environment.

As of October 2022, delinquency rates for Federal Housing Administration (FHA), US Department of Veterans Affairs (VA) and conventional loans are 4.6%, 2.5% and 0.8%, respectively (Figure 1 ).(2) Serious delinquencies for all loan types decreased in October 2022 compared to the prior year as delinquencies increased due to COVID.

Figure 1: Average Interest Rates for All Mortgage Lenders From One Year Ago.

In October, the annualized interest rate for FHA loans fell to 3.2 percent, for VA loans, it fell to 1.9 percent, and for conventional loans, the rate was reduced to 0.7 percent.

CoreLogic data shows the default rate for FHA loans is about five times higher than the default rate for conventional loans. To note, delinquency rates for FHA loans have been higher than for other types of mortgages.

Serious crime rates for both overall and average were lower for October 2022 than when the outbreak occurred. However, serious delinquency rates for FHA and VA are still higher than they were before the pandemic. The delinquency rate for FHA and VA loans in November 2020 reached a level greater than the level seen after the Great Recession.

Homeowners with FHA loans tend to be lower-income workers, and the pandemic had a worse impact on those homeowners compared to those in traditional loans. In addition, the increase in recent years in the refinancing activity of FHA borrowers who are now able to obtain conventional financing has resulted in the transfer of many existing FHA loans. are now in the standard service book, leaving some higher FHA loans. For example, the FHA in traditional refinancing will account for 11% of all financing in 2022 compared to only 2% in 2012 and 8% in 2019.(3)

(1) Serious delinquency is defined as 90 days or more past due or in detention proceedings. Delinquency severity is the percentage of all loans in a delinquency category.

(2) The analysis is based on the CoreLogic TrueStandings service. The CARES Act provided forbearance for borrowers with federally subsidized mortgage loans that were affected by the economic crisis. Borrowers in a forbearance program who miss a mortgage payment are included in CoreLogic delinquency statistics, even if the loan servicer has not reported the loan in default to credit bureaus.

(3) Based on CoreLogic general database.

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