Core Logic: Delinquency Numbers Remain Stubbornly High

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CoreLogic’s Loan Performance Insights report for September 2020 show that nationally, 6.3% of mortgages were in some stage of delinquency (30 days or more past due, including those in foreclosure), representing a 2.5-percentage point increase in the overall delinquency rate compared to September 2019, when it was 3.8%.

In September, the delinquency and transition rates, and their year-over-year changes, were as follows:

  • Early-Stage Delinquencies (30 to 59 days past due): 1.5%, down from 1.9% in September 2019, and down from 4.2% in April, when early-stage delinquencies spiked.
  • Adverse Delinquency (60 to 89 days past due): 0.7%, up from 0.6% in September 2019, but down from 2.8% in May, when adverse-stage delinquencies peaked.
  • Serious Delinquency (90 days or more past due, including loans in foreclosure): 4.2%, up from 1.3% in September 2019, but down slightly from 4.3% in August.
  • Foreclosure Inventory Rate (the share of mortgages in some stage of the foreclosure process): 0.3%, down from 0.4% in September 2019. The September 2020 foreclosure rate has stayed at 0.3% for six consecutive months, which was the lowest since at least January 1999.
  • Transition Rate (the share of mortgages that transitioned from current to 30 days past due): 0.8%, unchanged from September 2019. The transition rate has slowed since April 2020, when it peaked at 3.4%.

Borrowers who fell behind on their mortgages early this year continue to move through the stages of delinquency. Still, foreclosures remain low, and in September, serious delinquencies leveled out for the first time since April. This is in part due to the Dodd-Frank Act, which limits consumer exposure to risky-lending practices; the CARES Act, which affords borrowers more time to seek financial stability; and a record amount of home equity fueled by rapid home price growth, which provides a buffer against foreclosure.

“Although delinquencies remain high, it’s clear the economy has passed an initial stress test. High home equity balances and structural protections put in place as a result of the Great Recession contributed to surviving this test,” says Frank Martell, president and CEO of CoreLogic. “Housing demand remains strong, and rates low, which provides optimism that the housing market will continue to be a bright spot in this COVID-ravaged economy.”

“Our analysis of CoreLogic public records shows that more than one-half of all home mortgage loans created since the onset of the pandemic have been no-cash-out refinance,” adds Dr. Frank Nothaft, chief economist at CoreLogic. “By reducing their mortgage rate with these types of loans, homeowners have been lowering both their interest expense and risk of delinquency.”

In September, every state logged an annual increase in overall delinquency rates. For months, popular tourism destinations showed the highest increases, with Nevada (up 4.9 percentage points), Hawaii (up 4.7 percentage points) and Florida (up 4 percentage points) again topping the list for gains in September.

Similarly, nearly all U.S. metro areas logged an increase in overall delinquency rates in September. Lake Charles, La. – where Hurricane Laura hit in August – experienced the largest annual increase, of 10.7 percentage points.

Other metro areas with significant overall delinquency increases included Odessa, Texas (up 10.3 percentage points); Midland, Texas (up 7.9 percentage points); and Kahului, Hawaii (up 7.5 percentage points).

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