Natural disasters push mortgage delinquencies to three-year high

Natural disasters drove mortgage delinquencies in November to their highest level in three years, according to a report by ICE. 

Industry experts advise closely monitoring the trend but note that the share of borrowers missing payments remains low compared to the long-term average. Concerns are mainly concentrated in the government portfolio, particularly the Federal Housing Administration (FHA) mortgages. 

ICE data shows that loans 30 or more days past due – but not in foreclosure – rose to 3.74% in November after six consecutive months of increases.

This represents 2.027 million properties, an increase of 159,000 compared to October and 224,000 from November 2023. The uptick is due to typical seasonality, with Thanksgiving falling later in the month, combined with post-hurricane distress. 

“Delinquencies increased year over year in each of the last six months as the tides clearly turned to a modest shift higher,” Andy Walden, vice president of research and analysis at ICE, said in a statement. “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.”

Hurricanes Helene and Milton caused 14,000 new delinquencies in November, bringing the total to 56,000, with another 5,000 attributed to Hurricane Beryl. 

Serious delinquency — loans 90 or more days past due — reached 512,000 in November, up 32,000 from the previous month and 53,000 year over year. This marks the highest level since February 2023. 

However, foreclosure activity remains subdued. The pre-sale foreclosure inventory rate stood at 0.34%, with 21,000 foreclosure starts recorded in November, down 29% month over month and from the same period last year. 

Prepayment rates fell to 0.63% in November, a 25% monthly decline due to rising mortgage rates, but were up 71% compared to the same period last year.