Mortgage
servicers,
regulators
and
economists
are
closely
watching
the
delinquency
rates
for

Federal
Housing
Administration
(FHA)
loans
following
a
spike
in
the
fourth
quarter
of
2023.

Industry
experts
say
that
although
there’s
a
correlation
between
unemployment
and
delinquency
rates,
some
homeownership
costs
—
including
insurance
—
have
increased
significantly
over
the
past
two
or
three
years,
which
has
had
a
strong
financial
impact
on
homeowners.
But
experts
also
say
the
situation
is
not
as
bad
as
the
one
experienced
during
the
COVID-19
pandemic.

The
sources
spoke
about
these
issues
during
this
week’s


Mortgage
Bankers
Association
(MBA)
Servicing
Solutions
Conference
&
Expo
in
Orlando.

The
latest
MBA
data
shows
that
the

delinquency
rate
for
one-
to
four-unit
properties
rose
to
3.88%
at
the
end
of
2023,
compared
to
3.62%
in
the
third
quarter,
but
still
below
the
historic
average
of
5.25%.
Meanwhile,
the
FHA-insured
loan
delinquency
rate
recorded
a
larger
jump
during
the
same
period
to
10.81%,
up
from
9.5%,
the
highest
level
since
Q3
2021.

“We
are
seeing
a
bit
of
a
pickup
for
two
quarters
in
a
row,
but
it’s
very
important
to
keep
in
mind
that
we
were
at
the
absolute
lowest
point
in
delinquencies
in
the
third
quarter
of
2023,”
Marina
Walsh,
MBA
vice
president
of
industry
analysis,
research
and
economics,
said
in
a
market
outlook
session.

According
to
Walsh,
the
delinquency
rate
for
FHA
loans
increased
by
130
basis
points
from
the
third
to
fourth
quarters,
but
the
current
level
is
“certainly
not
nearly
where
it
was
at
the
height
of
COVID-19.” 

In
addition,
she
said
that
foreclosures
are
not
picking
up,
so
borrowers
are
either
paying
off
their
loans
before
entering
the
severe
delinquency
stage,
or
if
they
are
in
the
serious
delinquency
stage,
they
are
entering
a
workout. 

“The
question
I
posed
to
all
of
you
is,
‘Is
this
a
blip
or
a
bigger
trend?’”
Walsh
said,
adding
that
based
on
data
MBA
has
received
from
the
industry,
she
believes
the
delinquency
rate
could
come
down
a
bit
in
first-quarter
2024
following
the
end
of
the
busy
holiday
shopping
season.

“All
these
increases
in
costs
impact
people’s
ability
to
pay,
without
question,”
Steven
R.
Bailey,
senior
managing
director
and
chief
servicing
officer
at

PennyMac
Financial
Services,
said
in
an
executives’
perspective
session.
“But
we
still
see
the
strongest
correlation
is
between
unemployment
and
delinquency.”

Bailey
said
that
although
increases
in
delinquencies
are
not
a
trend
that
servicers
want
to
see,
“I
don’t
look
at
it
with
the
same
fear
that
I
used
to
look
like.” 

Homeowners
insurance

According
to
industry
experts,
one
of
the
costs
affecting
homeowners
is
their
insurance,
which
can
lead
to
increases
in
delinquencies.
California
and
Florida
are
among
the
states
where
the
situation
is
more
evident. 

Seven
of
the
12
largest
insurers
in
California
have
either

paused
or
restricted
new
policies
over
the
past
18
months,
including


State
Farm
and


Allstate.
In
September,
the
state’s
top

insurance
regulator
announced
that
new
rules
are
in
the
works
to
persuade
insurers
to
remain.

In
Florida,
the

departure
of
many
insurers
and
reinsurers
has
resulted
in
homeowners
paying
an
average
of
nearly
$4,000
a
year,
almost
three
times
the
U.S.
average,
according
to
estimates
from
the

Insurance
Information
Institute.

In
some
instances,
homeowners
have
seen
their
insurance
costs
more
than
triple,
but
a

new
bill
seeks
to
help
them.

“That’s
a
combination
of
both
rates
from
a
carrier
perspective,
as
well
as
just
the
increase
in
home
values,”
Patrick
A.
Sullivan,
vice
president
of
industry
relations
and
compliance
at

Assurant,
said
in
a
session
about
homeowners
insurance. 

Sullivan
said
reinsurance
is
another
factor
weighing
on
homeowners
insurance
costs,
a
function
of
the
global
capital
markets.
He
added
that
reinsurance
costs
have
more
than
tripled
over
the
past
three
years.

“Homeowners
insurance
is
certainly
a
problem
we
need
to
tackle
together,”

John
Bell,
executive
director
of
loan
guaranty
service
at
the

U.S.
Department
of
Veteran
Affairs
(VA),
said
during
a
regulatory
session. 

“I
hope
that
there
are
others
on
this
panel
and
others
out
there
that
want
to
work
together
to
try
to
solve
some
of
those
rising
prices
that
our
homeowners
just
can’t
absorb,
and
at
some
point
in
time,
it’s
going
to
hurt
the
market.”

Bell
said
that
if
a
home
costs
$800
per
month
more
than
last
year,
the
industry
needs
to
figure
out
how
to
solve
it.
Bell
and
the
VA
are
working
to
move
forward
with
options
to
help

veterans
avoid
foreclosure,
including
a
partial
claim
solution.

FHA
Commissioner
Julia
Gordon,
who
announced
the
agency’s
new

payment
supplement
partial
claim
during
the
conference,
added
that
the
issue
of
homeowners
insurance
will
take
a
village
to
tackle. 

“And
that’s
going
to
take
real
work
in
the
states
also,
which
is
hard,
and
we
just
have
to
do
it
if
we
want
people
to
be
protected,”
Gordon
said.

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