The number of loans in Fannie Mae and Freddie Mac’s portfolios with year-plus delinquencies has hit the highest point seen since their regulator started tracking them in 2015.
Mortgages in this category totaled 331,148 in just the first six months of 2021, compared to 79,591 at the end of 2020 and 51,512 in 2019, according to the Federal Housing Finance Agency’s latest nonperforming loan report. That makes the total as of June 30 second only to what was seen in 2015, when the FHFA recorded 199,619 loans in this category. The GSEs did not sell any NPLs in the first half, but subsequently resumed sales.
The breakdown of the June 30, 2021 numbers by time bucket suggests that long-term payment suspensions allowed for pandemic-related hardships account for many of the delinquencies recorded at that time. Just prior to the pandemic, delinquency rates and the volume of the distressed loans in the market had been historically low.
More than 296,000 or nearly 90% of the loans in Fannie and Freddie’s portfolios with long-term delinquencies have payments that were late by less than two years as of June 30. Another 28,455 had payments that were late by two to almost five years. A third group of 6,202 loans had delinquencies of five years or more.
To get a sense of what outcomes might be like, consider that through June 30, 41.2% of nonperforming loans secured by owner-occupied properties had avoided foreclosure. In comparison, by that point, 17.1% of vacant properties had. (Higher foreclosure rates on vacant properties are considered desirable because they protect against blight.)
Loans that are less than two years delinquent have stood the best chance of avoiding foreclosure at 41.7%, compared to 32% for loans with payments late by two to almost five years and 25% for mortgages that haven’t been paid for longer time periods, according to the FHFA.