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46 TALLYING THE HURRICANE DAMAGE Delinquency rates experienced an increase in Q 3 2017 for mortgage loans on one-to-four- unit residential properties, according to the MBA's National Delinquency Survey released in November. At a seasonally adjusted rate of 4.88 percent of all loans outstanding, the rate was up 64 basis points from Q2 2017 and 36 basis points higher from Q 3 2016. Foreclosure action starts represented 0.25 percent of all loans in Q 3, a one basis point decrease from the previous quarter and five basis point decrease from a year ago. According to Marina Walsh, MBA's VP of Industry Analysis, Q 3 2017 Hurricanes Harvey, Irma and Maria caused disruptions and destruction in numerous states. Florida, Texas, neighboring states, as well as devastated Puerto Rico, saw substantial increases in their past due rates. "In future surveys, we may see a temporary drop in foreclosure starts in hurricane-impacted states due to storm-related foreclosure moratoria, as was seen during Hurricane Katrina in 2005," Walsh said. e seriously delinquent rate, which combines loans that are 90 days or more past due with those loans in the process of foreclosure, was 2.52 percent in the third quarter, up 3 basis points from the previous quarter, but 44 basis points lower than one year ago. Mortgage delinquencies increased on a seasonally adjusted basis. e FHA delinquency rate increased to 9.40 percent from 7.94 percent in the second quarter, a 146 basis-point increase and the highest quarter-over-quarter increase reported in the history of our survey. Other delinquency increases included conventional (3.97 percent in Q 3 2017, 3.47 percent Q2 2017), and VA (4.24 percent in Q 3 2017, 3.72 Q2 2017). "While the storms played a critical factor in explaining the rise in the overall delinquency rate, there are other factors to consider, especially given delinquency rate increases in other states not directly impacted by the storms," Walsh said. e first factor noted was the timing issues associated with the last day of the month being a Saturday. Second, delinquency rates were already at historic lows in Q2 2017. Meanwhile, other considerable factors include seasonality, rising loan-to-value and debt-to-income ratios for certain product types, normal loan aging, and declining average credit scores on new FHA endorsements since 2014 as the agency has withdrawn from its counter- cyclical role during the crisis. TOP 3 BARRIERS TO HOMEOWNERSHIP As home prices rise and tight inventory continues, the current market has made it more challenging for American's to reach their goals of homeownership, especially for low-to-median- income borrowers and first-time homebuyers. According to the Urban Institute's Housing Finance Policy Center, there are three significant barriers to homeownership: saving for a down payment, accessing mortgage credit, and housing affordability. In a recent report, Urban Institute breaks down these barriers, reporting data on the latest market trends of these obstacles. One of the biggest barriers are consumers thinking they need to put more down than lenders actually require. According to the report, results show that 53 percent of renters cite saving for a down payment as an obstacle to homeownership. Meanwhile, 80 percent of consumers are unaware of how much lenders require for a down payment or believe all lenders require a down payment above 5 percent. Additionally, 15 percent assume that lenders require a 20 percent down payment, and 30 percent believe lenders expect a 20 percent down payment. Contrary to popular belief, borrowers are not putting down 20 percent. e report notes that the national median loan-to-value (LTV) ratio is 93 percent. With entities such as the Federal Housing Administration (FHA) and U.S. Department of Veterans Affairs (VA) offering lower down payment options than the GSEs, from 0 to 3.5 percent. Although the challenging path to homeownership isn't based on downpayment alone—credit access is historically tight, especially in during the post-crisis period. Currently, the media credit score of a new purchase mortgage origination is 779, compared with pre-crisis media of 692. National home price affordability has declined due to the growing home price appreciation, and for a mortgage with 20 percent down, mortgage payments would make up 22 percent of the median borrower's income. According to Urban Institute, if interest rates reach 4.75 percent, national affordability will return to historical average affordability.

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