State Housing Finance Agency delinquency rates continue to rise despite an improving housing market, Moody’s Investors Service reported.
Seriously delinquent loan-payment rates in HFA whole loan programs reached a five year high of 5.27% as of June 30, wrote associate analyst Richard Kubanik and other Moody’s analysts. The agency defines seriously delinquent loans as those that are 90 or more days delinquent or in foreclosure. A “whole loan” is “a single residential … mortgage that a lender has issued to a borrower and that has not been securitized,” according to Investopedia.
The current level of serious delinquency is a 45% increase from June 30, 2009, when the level was 3.63%. It is also a 6% increase from June 30, 2011, when the level was 4.98%.
The increase in serious delinquency from 2011 levels was due to increases in mortgages that are 90 or more days delinquent rather than due to increases in foreclosures.
Recently, there have been lower delinquencies and slightly higher home prices in the housing market overall, Kubanik wrote.
High unemployment and low housing prices are expected to keep delinquency and foreclosure rates high through 2014, according to the Moody’s report “U.S. State Housing Finance Agency Delinquency Rates Continue to Rise Despite Improvement in National Housing Market.”
“Loan delinquencies can … be attributed to the decline in home prices. When prices are rising, delinquent homeowners had the option of selling homes, thereby avoiding foreclosure — an option that is not available in locations where home values declined,” Kubanik wrote.
“HFA loan performance has also been impacted by loan modification programs, loss-mitigation initiatives, and various state policies — all of which have contributed to lengthened delinquency periods.”
“Despite the weakened performance of HFA single-family whole loan portfolios, we do not anticipate many downgrades because the programs continue to maintain strong financial asset to debt ratios, adequate reserves and foreclosure rates still remain well below the default rates that we use for our stress case loan-loss calculations,” Kubanik wrote.
Furthermore, most of the HFA loans have mortgage insurance that mitigates losses in case of foreclosure, the report noted. HFA portfolios consist mainly of “seasoned” loans that were originated before 2005. Compared to new loans they are less likely to become delinquent, said Moody’s associate managing director Florence Zeman.