Mortgage defaults level off in June, FHA new defaults down 15%

New mortgage default activity remained stable in June, with new defaults among Federal Housing Administration (FHA) borrowers falling 15% from a year earlier, marking the largest annual decline in more than four years.

That’s according to Intercontinental Exchange’s (ICE) latest First Look Mortgage Performance report, which observed that overall mortgage performance remained strong during the month, although delinquencies ticked higher on a seasonal basis.

“Early-stage delinquencies remain subdued, and while serious delinquencies including foreclosures have reached pre-pandemic levels, new default activity has leveled off in recent months — a positive sign,” Andy Walden, head of mortgage and housing market research at ICE, said in a statement. “New FHA defaults, which have been a focal point of market attention, were down 15% year over year in June. These trends are encouraging, even as the market continues to warrant close monitoring.”

The report found that the overall delinquency rate remained well below pre-pandemic levels, at 3.55% compared to the 4.16% pre-pandemic benchmark in June 2019.

Serious delinquencies, meaning loans 90 or more days past due but not in foreclosure, declined to 570,000, their lowest level in six months, continuing an improvement that began in March.

Improvements in early-stage mortgage performance

ICE also reported improvements in early-stage mortgage performance, with fewer borrowers rolling into both 30-day and 60-day delinquency on both a monthly and annual basis.

The active foreclosure inventory rate increased to 0.53% in June, the highest level in six years. Foreclosure starts reached a six-year high, while foreclosure sales rose 16% from a year earlier, though they remained 46% below pre-pandemic levels. The number of properties that are 30 or more days past due, but not in foreclosure, increased from the previous month to 1,961,000 properties.

President of ICE Mortgage Technology Bob Hart said elevated homeowner equity continues to help many distressed borrowers avoid foreclosure despite the increase in early foreclosure activity.

“High levels of homeowner equity continue to strengthen the market and help many distressed borrowers avoid foreclosure,” Hart said. “Still, early foreclosure activity bears watching, making timely data and proven servicing tools more important than ever. ICE’s McDash loan-level performance data is relied upon by many of the industry’s leading participants to monitor portfolio performance and model default risk, while our Loss Mitigation solution helps servicers improve borrower outcomes by executing workout strategies more efficiently while supporting compliance.”

Mortgage prepayment speeds slowed in June, the report found. The single-month mortality rate fell to 0.77%, a five-month low, as mortgage rates remained elevated, although prepayment activity was still above year-ago levels.

As of June 30, ICE estimated there were 1.96 million properties at least 30 days delinquent but not in foreclosure and 292,000 properties in foreclosure pre-sale inventory, bringing the total number of non-current loans to approximately 2.25 million.

This article was generated using HousingWire Automation and reviewed by a HousingWire editor before publication.