Foreclosure inventory hit a 15-month low in July representing the continued strength of mortgage performance.

Loans in active foreclosure fell to 220,000 – the fewest since just after the end of federal foreclosure moratoria – and were down 63,000 or 22% from February 2020, prior to the pandemic, according to Black Knight’s mortgage performance statistics.

July’s foreclosure starts of 26,300 were 4% below the average number of such actions over the preceding 12 months and remain 39% below pre-pandemic levels.

Foreclosure starts equated to 5.6% of 90+ day delinquencies – still more than three percentage points below pre-pandemic foreclosure referral rates. July’s foreclosure sales (completions) of 6,100 nationally were down 11% from June. 

“Both serious delinquencies falling to their lowest levels since the pre-Great Financial Crisis era along with foreclosure inventories falling to a 15-month low speak to the continued strength of mortgage performance and the long-term financial benefits received by borrowers that were able to lock in record low 30-year rates for the life of their loans in recent years,” Andy Walden, vice president of enterprise research and strategy for Black Knight, said. 

Prepayment activity fell under easing seasonal home buying pressure along with interest rates briefly rising above 7% and ending July at 6.88%. Prepayment was still down 28% from July 2022. 

National delinquency rate edged up 9 basis points in July to 3.21%. But compared to the same period last year, it was down 12 bps.

Serious delinquencies – which refer to 90+ days past due – continued to improve, falling to 468,000 – the lowest level seen since the pre-Great Financial Crisis housing market peak and down 161,000 (-26%) from July 2022. 

Mortgages that were delinquent by 30 days rose by 35,000 in July, with 60-day delinquency climbing by 17,000 (6.4%).

“With early-stage delinquencies among more recent originations trending higher and economic uncertainty on the horizon, mortgage performance will be worth tracking closely as we move toward the tail end of 2023,” Walden noted.