Mort­gage delin­quen­cies:

The Washington Post - - FRONT PAGE - BY KATHY ORTON kathy.orton@wash­post.com

Largest one-month in­crease recorded.

Record un­em­ploy­ment caused by the coro­n­avirus pan­demic led to the largest one-month in­crease in mort­gage delin­quen­cies ever recorded. The num­ber of bor­row­ers who stopped pay­ing their home loans spiked by 1.6 mil­lion last month, new data shows.

Not even dur­ing the Great Re­ces­sion did delin­quen­cies rise this fast. Dur­ing that time, it took 18 months be­fore there was a sin­gle­month in­crease as large.

The na­tional delin­quency rate soared to 6.45 per­cent in April, up from 3.06 per­cent in March and three times the pre­vi­ous sin­gle­month record set in 2008, ac­cord­ing to data re­leased this week by Black Knight, a real es­tate data and an­a­lyt­ics com­pany. The 3.6 mil­lion bor­row­ers who are past due are the most since 2015.

The data rep­re­sents home­own­ers who didn’t make a mort­gage pay­ment in April, in­clud­ing those who are in for­bear­ance plans. It comes from the com­pany’s loan­level data­base rep­re­sent­ing a ma­jor­ity of the na­tional mort­gage mar­ket.

“This is truly un­charted ter­ri­tory,” Andy Walden, econ­o­mist and di­rec­tor of mar­ket re­search at Black Knight, wrote in an email. “Dur­ing the last fi­nan­cial cri­sis, it took more than a year and a half be­fore we saw the first 1.6 mil­lion home­own­ers fall past due on mort­gages as a re­sult. In the eco­nomic fall­out from Covid-19, that many peo­ple be­came past due in April alone.

“Given that just 21 per­cent of the now 4.75 mil­lion home­own­ers in for­bear­ance have made their May pay­ments so far, this is a trend that is likely to con­tinue.”

You only need to look at the job mar­ket to un­der­stand why so many peo­ple aren’t pay­ing their mort­gages these days. The U.S. econ­omy shed 20 mil­lion jobs in April and the un­em­ploy­ment rate soared to its high­est level since the Great De­pres­sion as many busi­nesses na­tion­wide shut­tered. The im­pact has been swift and se­vere: An ad­di­tional 2.4 mil­lion Amer­i­cans filed job­less claims last week, the La­bor De­part­ment an­nounced, push­ing the na­tion’s nine-week to­tal past 38 mil­lion.

“Since 2006, there has been a very clear cor­re­la­tion be­tween un­em­ploy­ment and past dues,” said Ma­rina Walsh, an econ­o­mist with the Mort­gage Bankers As­so­ci­a­tion.

The rapid rise in delin­quen­cies is in con­trast with the Great Re­ces­sion. Back then, they were more spread out over a longer pe­riod of time.

“When you think of the Great Re­ces­sion, it re­ally started in 2007, 2008, but delin­quen­cies didn’t peak un­til 2010,” Walsh said. “With the Great Re­ces­sion, quite frankly, it dragged on quite awhile. . . . It hap­pened in waves. It’s not as if a whole in­dus­try went flat. Like you have hos­pi­tal­ity and tourism, there were whole in­dus­tries that were put on hold.”

But un­like the Great Re­ces­sion, the hous­ing mar­ket is on bet­ter foot­ing. Home val­ues haven’t fallen dra­mat­i­cally, and many home­own­ers have eq­uity in their homes. Be­cause of that, Walsh doesn’t ex­pect fore­clo­sures to be as dev­as­tat­ing as last time. Un­der the Cares Act, fore­clo­sures of fed­er­ally backed mort­gages have been tem­po­rar­ily paused. Walsh also pointed out that bor­row­ers have more al­ter­na­tives to avoid fore­clo­sure.

“It’s not as if all these home­own­ers are un­der­wa­ter and they had no in­cen­tive” to make a mort­gage pay­ment, she said. “Here, there’s an in­cen­tive to make mort­gage pay­ments.”

The Mort­gage Bankers As­so­ci­a­tion, which re­leases its delin­quency data quar­terly, found that past­due mort­gages rose to 4.36 per­cent in the first quar­ter af­ter be­ing at an all-time low of 3.77 per­cent in the fourth quar­ter of 2019. It also tracks the num­ber of loans that have gone into for­bear­ance. When a loan goes into for­bear­ance, pay­ments are re­duced or post­poned.

The num­ber of loans in for­bear­ance is also in­creas­ing, al­beit at a slower pace than pre­vi­ously. Black Knight found that 4.75 mil­lion home­own­ers, or 9 per­cent of mort­gages, had en­tered into for­bear­ance plans, rep­re­sent­ing $1 tril­lion in un­paid prin­ci­pal bal­ances. MBA’S sur­vey of lenders found 4.1 mil­lion home­own­ers had re­quested a for­bear­ance plan, or 8.16 per­cent of loans. By com­par­i­son, less than 1 per­cent of loans were in for­bear­ance in early March. Un­der the Cares Act, home­own­ers can sus­pend their mort­gage pay­ments if they have a fed­er­ally backed mort­gage.

“The num­bers are un­for­tu­nately pretty dis­mal,” Walsh said. “The hope is with the stim­u­lus com­ing to bor­row­ers, un­em­ploy­ment [ben­e­fits] will help in the short term. I think a lot of this is go­ing to be re­gional.”

Black Knight’s data shows that states that are home to some of the hard­est-hit in­dus­tries are suf­fer­ing the most. The states that had the big­gest in­creases in delin­quent mort­gages in­clude Ne­vada (5.2 per­cent in­crease), New Jersey (5.1 per­cent) and New York (4.9 per­cent). Mi­ami (7.2 per­cent), Las Ve­gas (6.2 per­cent) and New York City (5.4 per­cent) topped the metropoli­tan ar­eas.

The pace of mort­gages go­ing into for­bear­ance has slack­ened re­cently with 93,000 bor­row­ers en­ter­ing into it last week, down from 1.4 mil­lion in the first week of April.

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