ICE’s First Look report shows mortgage performance is strong despite FHA strain

The mortgage market remains largely resilient — with delinquencies and foreclosures still below long-term averages — even as performance among Federal Housing Administration (FHA) loans continues to weaken. That’s according to ICE Mortgage Technology’s First Look report on September mortgage performance data.

The data, released Friday, show the national delinquency rate — loans 30 or more days past due but not in foreclosure — fell by 2 basis points from August, with improvements in both early-stage (30-day) and serious (90-day-plus) delinquencies.

The rate was also down 6 bps from a year earlier and sat 58 bps below the figure in September 2019 prior to the COVID-19 pandemic.

Foreclosure starts climbed to 42,000 in September — 43.5% higher than in August and up 60.5% year over year. For the full third quarter, foreclosure starts totaled 103,000, a 23% annual increase but still 18% below levels seen in Q3 2019. 

ICE’s noncurrent rate, which combines delinquencies and active foreclosures, improved year over year across most loan types, including conventional mortgages through Fannie Mae and Freddie Mac (-3 bps), U.S. Department of Veterans Affairs (VA) loans (-4 bps) and portfolio loans (-17 bps).

FHA loans remain a key area of concern. Their noncurrent rate rose 44 bps year over year in September, and FHA mortgages represented 38% of active foreclosures — accounting for roughly half of this year’s increase in foreclosure starts and 80% of the rise in active foreclosures. ICE Mortgage Technology noted that the remaining foreclosure growth reflects the expiration of the VA foreclosure moratorium.

ICE characterized the uptick in government-backed loan distress as part of a market normalization process rather than a sign of broader weakness.

“The mortgage market remains remarkably resilient, with mortgage performance continuing to hold up well,” Andy Walden, ICE’s head of mortgage and housing market research, said in a statement.

“Delinquency rates improved in September, and even as we see increases in activity among FHA loans, we’re largely returning to more typical levels following several years of artificially low foreclosure volumes.”

A more detailed analysis will be available Nov. 10 in the ICE Mortgage Monitor report.