Residential Loan Performance Shows Slight Seasonal Improvement in Q2 2024

U.S. Banks Residential – Two Year Historical

Residential loan performance seems to be showing slight improvement in 2024. With the usual seasonal trends demonstrating less distress during the second quarter. 

Still, US banks hold tens of billions of dollars in non-performing debt, with a likelihood of an increase in delinquencies by the end of the year. 

Let’s dig into the latest bank data from Q2 to see exactly what is going on…

Banks Hold Over $44B First Position Non-Performing Residential Mortgages

U.S. Residential – 1st Position Non-Performing [Q2 2024]

As in the previous quarter, US banks reported over $16B in first mortgages on 1-4 family properties which are in the 30-89 day late stage this quarter. Down again from the previous two quarters. 

However, many of those who are falling into default are not finding help or able to get out of it, evidenced by a slight increase in REOs, and defaulting second liens. 

In the pipeline are also almost $16B first position non accrual loans on 1-4 family residences, as well as over $12B in 90 day plus late loans, which have not yet been categorized as non accrual. 

U.S. Residential – REO [Q2 2024]

Residential REOs

648 banks reported holding residential REO at the end of the second quarter this year, down by about 40 from the end of last year.    

At $766M, this is slightly higher than in the previous quarter, yet represents just 1% of the total volume of distressed residential loans being reported. 

Higher housing prices have probably helped minimize the number of loans in this bucket, so far.

Non-Performing Residential Loans

The largest percentage non-performing residential first position mortgage loans is now in the newly late category.  

As of Q2 the distribution of non-performing first mortgage liens being reported includes:

  • $16.2 in 30-89 day late loans
  • $12.2B in 90 day plus late and still accruing loans
  • $15.9B in non-accrual loans

Discover the 3,000 plus banks holding these non-performing loans inside BankProspector now.

Junior Liens

At the end of the second quarter of 2024 there were almost $4.5B in non-accrual stage revolving lines of credit, down slightly in dollar volume, but 1% more of the total distress pool, compared to Q1.  

Additionally, there were around $1.6B in newly delinquent HELOCs behind those as well as close to $173M in 90+ day late home equity lines of credit. Both of these categories have increased over the past three months.

Defaults on revolving credit lines (HELOCs) continue to be far higher than on fixed second mortgage liens. 

Dive into the BankProspector dashboard to find out which banks are reporting the most distressed residential junior lien loans and HELOCS.

Looking Ahead

Bank data from Q2 2024 shows the residential loan market holding steady, with minor improvements. 

This is typical for this time of year, with an increase in distress and more defaulting loans typically coming at the end of the year. 

How this year ends up for investors, borrowers, and their lenders appears to be heavily weighing on the outcome of the upcoming Presidential election.

Log in now to see which banks are currently holding the most distressed loans…

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