One in 20 behind in May
For just shy of a decade, serious mortgage delinquencies have consistently marched lower as the nation healed from the housing crisis. But now another crisis, the pandemic, is causing them to surge again, even in metro Denver, which has boasted one of the lowest delinquency rates in the country.
“The national unemployment rate soared from a 50-year low in
February 2020, to an 80-year high in April,” Frank Nothaft, chief economist at CoreLogic, said in comments accompanying the company’s Loan Performance Insights report. “With the sudden loss of income, many homeowners are struggling to stay on top of their mortgage loans, resulting in a jump in non-payment.”
Serious delinquencies, defined as those where a borrower is 90 days or more behind, were 1.5% of the total in the U.S. in May, up from 1.3% of the total in May 2019.
It marked the first year-over-year increase since November 2010.
A lot more mortgages have gone bad as the pandemic has worn on. Absent further government programs and support, CoreLogic forecasts the U.S. serious delinquency rate to quadruple by the end of 2021, pushing 3 million homeowners into the seriously delinquent category.
Metro Denver, thanks to its robust housing and job markets, has ranked among the top-performing metro areas when it comes to borrowers staying current on the monthly mortgage payment. Its serious delinquency rate hit 0.6% in May, up from 0.4% in May 2019.
But that doesn’t mean problems aren’t brewing. About 5% of mortgage borrowers were more than 30 days late in May, compared to only 1.5% in May 2019. And with Colorado’s unemployment rate at an elevated 10.5% in June and enhanced federal unemployment benefits of $600 a week ending in July, more homeowners are likely to become seriously delinquent.
About 3% of U.S. mortgages in May were early-stage delinquencies, or 30 to 59 days past due, up from 1.7% in May 2019. Another 2.8% were in the adverse delinquency stage, 60 to 89 days past due, up from 0.6% a year earlier. After 90 days, lenders historically could start foreclosure proceedings.
But foreclosures likely won’t be as common this time around. Lenders were required or encouraged to offer forbearance
agreements to struggling borrowers, allowing them to skip up to a year’s worth of payments. More than 4 million homeowners, or 8% of those holding a mortgage, sought a COVID-19 mortgage forbearance agreement, with about 3.7 million borrowers still in them, according to the Mortgage Bankers Association.
Compared to the Great Recession, the equity that homeowners are holding is much higher. If push comes to shove, many can sell and pay off the mortgage rather than having the bank boot them out.
Miami, Kahului, Hawaii, and Odessa, Texas, were the metro areas with the highest increase in their overall delinquency rates. New Jersey, a COVID-19 hot spot, and Nevada, heavily dependent on its casinos, had the largest jump in delinquencies of any states, with New York and Florida also hard hit.