Data from the mortgage market reveals a concerning trend: rising delinquency rates, particularly among FHA and VA loans, which are popular choices for first-time homebuyers. Experts warn that this could signal broader challenges for the housing market.
Data from a specific segment of the mortgage market primarily used by first-time homebuyers suggests that this group might be encountering difficulties. According to fourth-quarter data released by the Mortgage Bankers Association, the delinquency rate on Federal Housing Administration (FHA) loans has risen at a considerably faster pace than late payments on more conventional mortgages. A similar trend was observed in loans provided by the Department of Veteran Affairs (VA).
FHA loans are among the most common types of mortgages in the US for first-time buyers, as they cater to borrowers with lower incomes or credit scores. \'Conventional delinquencies remain near historical lows, but FHA and VA delinquencies are increasing at a faster rate,' stated Marina Walsh, MBA vice president of industry analysis. 'Compared to one year ago, the seriously delinquent rate climbed seventy basis points for FHA loans and fifty-seven basis points for VA loans, but only two basis points for conventional loans,' Walsh added. According to comparable findings from the Intercontinental Exchange (ICE), this sharp surge has propelled FHA delinquencies 2.5 percentage points above pre-COVID pandemic levels. For context, the national delinquency rate currently stands 22 basis points below its pre-pandemic rate. While overall mortgage delinquencies generally saw an uptick throughout 2024, certain areas of the loan market experienced a decline. \'With FHA and VA loan delinquencies likely acting as early warning indicators for mortgage performance in this cycle, we anticipate this to become a prominent topic of discussion in 2025,' ICE noted. Walsh suggested that homebuyers are facing a multitude of challenges, including inflation, declining personal savings rates, natural disasters, and increases in debt, taxes, and insurance payments. Mortgage payments have also risen significantly in recent years, likely placing a strain on loan affordability. The prevailing 30-year fixed mortgage rate is 6.89%, considerably higher than the 3% level prevalent during the pandemic. Many of these trends are frequently cited as reasons why first-time buyers have increasingly been excluded from the housing market. According to the National Association of Realtors' 2024 report, these buyers constituted only 24% of home sales between July 2023 and June 2024 — the lowest percentage recorded in the survey's history
FIRST-TIME HOMEBUYERS MORTGAGE DELINQUENCIES FHA LOANS VA LOANS HOUSING MARKET
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