Seasonally adjusted defaults on certain government insured or guaranteed home loans saw the largest slump in Mortgage Bankers Association survey history in the second quarter, as defaulted payments saw wider declines.
The decline in the following quarter to 12.77% from 14.67% in the Federal Housing Administration insured loans and 6.47% from 7.62% in the Veterans Department guaranteed mortgage loans occurred as the total defaults of 6.38 % fell to 5.47%, marking an unseen low since the first quarter of last year.
As with FHA and VA loans, mortgages 90 days late or more saw a record decline, falling 72 basis points to 3.53% between Q1 and Q2. A year ago, the seasonally adjusted total default rate for the second quarter was 8.22%. The equivalents for FHA and VA loans were 15.65% and 8.05%, respectively.
The fact that even loans with higher pandemic distress or longer-term hardship have seen significant declines reinforces other indicators that suggest that the market could normalize if infection rates remain contained.
"It appears that later stages of late payment borrowers are recovering from a number of factors including improved employment and other economic conditions, the availability of options to keep housing after deferral, and a strong housing market that provides additional alternatives for homeowners in need." said Marina Walsh, vice president of industry analysis for the MBA, in a press release.
All loans where the borrower failed to meet the contractual obligation, including deferred mortgages, were treated as defaulted for the purposes of this survey. Foreclosures were excluded from default rates. The association has been tracking crime rates since 1979.