Newer delinquencies become more of a focus at the GSEs

Loans with payments late by a year or more were the biggest sub-category within the government-sponsored enterprises’ distressed portfolios a year ago, but now mortgages that’ve been late for 30-59 days are.

Mortgages late by 30-59 days constituted nearly half or more than 47% of Fannie Mae and Freddie Mac’s delinquent loans at the end of the third quarter, according to the Federal Housing Finance Agency’s latest report.

A year earlier, loans late by a year or more made up the largest subset of that group at 36.5% and the share for mortgages late by a month was 30.5%. At the end of this year’s third quarter, loans delinquent by 365-plus days was the second largest category, but with only a 16.9% share.

The shift likely reflects in part the transition away from forbearance that became widespread amid the pandemic and is being slowly unwound, but it could also stem from the buildup of stress on consumers’ finances over the past year.

More than 37% of households couldn’t cover expenses for longer than one month if they lost their main source of income in 2022, according to a new Consumer Financial Protection Bureau report. The report reflects takeaways from a survey conducted earlier this year. 

Although overall employment outside of the mortgage industry is strong, the increasing gap between wages and the cost of living could leave a thin financial buffer for many people. In a separate report published Wednesday, the CFPB found household financial health is declining after years of gains for these reasons.

In a separate report on nonperforming loans, the FHFA found that mortgages that have been delinquent for at least two years but less than five years have come to constitute a growing share of the enterprises’ portfolio.

That report, which reflects the first half of 2022, shows loans in this category made up 38% of the NPL portfolio, second to loans delinquent for a year or more but less than two years (58%). In comparison, at the end of 2021, just 13% of loans were in the first category and 84% were in the second. The enterprises’ combined portfolio also contains a small number of loans that have been delinquent for five years or more.