Fewer People Fell Behind Last Quarter. The Ones Already Behind Slid Further.

The Mortgage Bankers Association put out its quarterly delinquency survey yesterday and the headline number improved. Fewer homeowners were behind on a mortgage at the end of June than at the end of March.

If you’re behind right now, that headline isn’t about you. There’s a second number underneath it that went the other way, and it’s been going the other way for a year.

The Number That Went Down

4.37 percent of home loans were delinquent at the end of the second quarter. That’s down 7 basis points from the first quarter, which is a small improvement, and up 44 basis points from a year ago, which isn’t.

Then it splits by stage, and the split is the whole story.

Loans one payment behind, the 30 day bucket, fell to 2.21 percent. Two payments behind, 60 days, fell to 0.73 percent. Three payments behind, 90 days, went up to 1.43 percent.

So fewer people started falling behind this quarter. More of the people who were already behind kept sliding.

The Numbers That Went Up

MBA tracks a separate figure they call seriously delinquent, which means 90 days or more past due or already in the foreclosure process. That one is 2.06 percent. Up 3 basis points on the quarter, up 49 on the year, and it has now risen four quarters in a row.

Marina Walsh, who runs industry analysis at MBA, said it plainly in their release: “Some loans are continuing to move to later stages of delinquency.”

The share of loans sitting in the foreclosure process went to 0.67 percent, up 19 basis points on the year. New foreclosure starts went down.

Those two moving in opposite directions is the part I’d look at twice. Fewer new files going in, more files sitting inside. That’s what it looks like when cases already in the system aren’t resolving.

What Changes Between 30 Days Behind and 90 Days Behind

Here’s the part that doesn’t make the news, and it’s the part that matters if you’re the one in one of those buckets.

The distance between 30 days behind and 90 days behind isn’t just two more months of stress. The options are different at each stop.

At 30 days, catching up is usually arithmetic you can still do. One payment and a late fee. The servicer’s list of what they can offer is wide open, and nothing has been filed anywhere.

At 90 days, the arrearage is three payments plus fees, and for a lot of households that’s past the point where next month’s paycheck closes it.

There’s also a clock running that most people don’t know about. Under the federal mortgage servicing rules, a servicer generally can’t make the first foreclosure filing until the loan is more than 120 days delinquent. That’s 12 CFR 1024.41(f), and I read it this morning rather than repeating what somebody said about it. There are exceptions written into the rule, including when the servicer is joining a foreclosure that another lienholder already started. HOA cases can land in that exception.

So 90 days sits about a month short of the earliest a case would normally be filed.

And there’s a piece of that same rule almost nobody brings up. If a complete loss mitigation application is with the servicer before that first filing, the servicer generally can’t make the filing while they’re evaluating it. The word doing the work there is “complete.” An application missing a document isn’t complete, and the protection doesn’t attach to one that isn’t.

I’m not an attorney, and how any of that lands on a specific loan is a legal question. But knowing the clock is there changes what a phone call to your servicer in month two is worth.

FHA Is Carrying Almost All of It

One more number, and it’s the one I’d take out of this report.

The delinquency rate on conventional loans is 2.72 percent. On VA loans, 4.89 percent. On FHA loans, 11.79 percent.

Year over year, conventional delinquency is up 12 basis points. VA is up 57. FHA is up 122.

On the serious delinquency measure the gap is wider still. Conventional up 6 basis points in a year, VA up 31, FHA up 227.

Walsh again, from the same release: “FHA serious delinquencies are becoming pronounced, increasing more than 225 basis points from the previous year.”

That isn’t a gap widening a little. That’s one loan type carrying most of the deterioration in the entire survey.

If you bought with an FHA loan in the last few years, you’re in the group those numbers are describing. That’s not a comment on anybody’s decision. FHA is the program built for buyers with less cash up front, so it’s the program that shows strain first when insurance and taxes and everything else climb.

One thing this survey does not say, and I want to be clear about it. There’s no Florida number in it. MBA named seven states with the largest quarterly increases and Florida wasn’t among them. Anybody telling you this release proves something specific about Florida is reading in something that isn’t on the page.

Where I Stop

Whether forgiven mortgage debt lands on you as taxable income is a tax question, and the exclusion that used to cover most of it lapsed at the start of this year. What any of this does to your credit is its own separate thing. Whether a servicer handled your file the way the rules require is a legal question.

I’m not your attorney and I’m not your CPA. Those go to the people who are.

What I can lay out is how each path behaves inside an actual closing. Catch up and keep the house. Ask the servicer about a modification or a repayment plan. Sell the normal way if the numbers reach. Ask the lender to take less through a short sale if they don’t. Hand it back through a deed in lieu. Or let it run through the court and deal with what’s on the other side. Each one costs something different, and which one fits is yours to pick.

Whether a lender agrees to any of it is that lender’s call on their own file. I can’t tell you how yours would go.

What the stage numbers in this survey say is that the population sitting at that second stop grew again, for the fourth quarter running. The thing that usually costs people isn’t the situation. It’s how far into it they are before they start asking questions.

Jacksonville, Florida is where I work, and distressed property is most of what I do. A Florida license stops at the state line, so if you’re reading this somewhere else, that question goes out through the SFR referral network to somebody licensed where you are.

If any of this is useful, I’m easy to reach. JimArmstrong904@gmail.com, or (904) 671-4161 if you’d rather talk it through.

Jim Armstrong, REALTOR, Momentum Realty, SFR (Short Sales and Foreclosure Resource) certified. This is general information, not legal, tax, or financial advice.

Momentum Realty is not associated with the government, and our service is not approved by the government or your lender.