Mortgage delinquencies deteriorate in November

Mortgage delinquencies continued to rise in November, and are now at their highest levels in almost three years, according to ICE Mortgage Technology.

While many of the new late payments are a result of borrowers hurt by Hurricanes Helene and Milton, it is just another sign of distress starting to infiltrate the market.

“Delinquencies increased year over year in each of the last six months as the tides clearly turned to a modest shift higher,” Andy Walden, ICE vice president of research and analysis, said in a statement on the First Look report. “They remain well below long-run averages but given the larger-than-expected rise in November, mortgage performance is worth watching closely as we enter 2025.”

November’s total delinquency rate was 3.74%, an increase of 29 basis points or 8.38% from October’s 3.45%. It is also a gain of 10.46% from November 2023’s 3.39%.

It is also the highest level of delinquencies since February 2022, when the rate was 3.94%.

Besides the post-hurricane distress, ICE also pointed to a late-in-the-month Thanksgiving holiday that likely affected payment processing.

Still, all stages of defaults rose during the month, with borrowers considered seriously delinquent — those 90 days or more past due on their payment but not yet in foreclosure — at the highest level since February 2023.

The total number of properties where the borrower is 30 days or more late on their payment but not in foreclosure rose by 155,000 from October to over 2.02 million. The year-over-year increase was 224,000 homes.

In comparison, between September and October, the 30-days or more late bucket fell by 11,000 properties.

The elevated level is likely to be of short duration, however, as defaults related to natural disasters typically cure quickly as businesses reopen and people return to work. The government-sponsored enterprises grant a one-year forbearance for natural disasters, while the Federal Housing Administration just extended a foreclosure moratorium for loans it insures that are in areas affected by either of those storms.

Of that total, 512,000 borrowers were 90-days or more delinquent, up 32,000 from October and 53,000 versus November 2023.

But the pre-foreclosure inventory did shrink by 4,000 from the previous month to 185,000. That is 31,000 lower than one year ago.

Prepayment speeds increased compared to the month prior, as the impact of higher mortgage rates was felt on refinance activity.

Since the end of September, when the Federal Open Market Committee made the first of what now has become three rate cuts, the 30-year fixed rose 64 basis points according to Freddie Mac.

That did not take into account the most recent FOMC reduction. Lender Price data on the National Mortgage News website had put the 30-year FRM at over 7% since the meeting.

The benchmark 10-year Treasury peaked at 4.57% on the morning of Dec. 23, a gain of 18 basis points since the close on Dec. 16, the day before the latest rate cut was announced.

That is likely to influence prepayment speeds in the coming months.