Absent government intervention, serious delinquencies could double by 2022, expert says
The rate of serious mortgage delinquencies spiked in June to its highest level in more than five years, according to a new report by CoreLogic.
On a national level, 7.1% of mortgages were in some stage of delinquency in June, according to CoreLogic’s latest Loan Performance Insights report. That’s a 3.1-percentage-point increase over the delinquency rate of 4% in June 2019. While early-stage delinquencies (30 to 59 days past due were at 1.8%, down from 2.1% in June 2019, adverse delinquencies (60 to 89 days past due) and serious delinquencies (90 or more days past due, including loans in foreclosure) were both up year over year.
Adverse delinquencies represented 1.8% of all mortgages, up from 0.6% in June of last year. Serious delinquencies accounted for 3.4% of all mortgages, up from 1.3% in June 2019. This is the highest serious delinquency rate since February of 2015, according to CoreLogic.
“The housing market is facing a paradox,” CoreLogic said. “The CoreLogic Home Price Index shows home-purchase demand has continued to accelerate this summer as prospective buyers take advantage of record-low mortgage rates. However, mortgage loan performance has progressively weakened since the start of the pandemic.”
Sustained unemployment due to the economic impact of the pandemic has pushed many homeowners further into delinquency. With unemployment projected to remain high through the end of the year, there may be further impacts on delinquency and foreclosure, CoreLogic said. The analytics firm predicted that unless additional government support programs are enacted, serious delinquency rates could nearly double by early 2022. Not only could millions of families lose their homes, but this could also create downward pressure on home prices as distressed sales are pushed back into the market, the analytics firm said.
“Three months into the pandemic-induced recession, the 90-day delinquency rate has spiked to the highest rate in more than 21 years,” said Dr. Frank Nothaft, chief economist at CoreLogic. “Between May and June, the 90-day delinquency rate quadrupled, jumping from 0.5% to 2.3%, following a similar leap in the 60-day rate between April and May.”
“Forbearance has been an important tool to help many homeowners through financial stress due to the pandemic,” said CoreLogic President and CEO Frank Martell. “While federal and state governments work toward additional economic support, we expect serious delinquencies will continue to rise – particularly among lower-income households, small business owners and employees within sectors like tourism that have been hit hard by the pandemic.”