Although the overall mortgage delinquency rate remains up from a year ago, due to the economic impact of the pandemic, it continues to improve on a month-over-month basis and is expected to improve throughout the remainder of this year, two recent reports show.
According to CoreLogic’s Loan Performance Insights Report, the overall mortgage delinquency rate (30 days or more past due, including those in foreclosure) increased 2.1 percentage points year-over-year in February to reach 5.7% of all loans.
Serious delinquencies (90 days or more past due, including loans in foreclosure) represented 3.7% of all loans, up significantly compared with 1.2% in February 2020.
But there is reason for optimism. Early-stage delinquencies (30 to 59 days past due) represented 1.5% of all loans, down from 1.8% in February 2020.
And loans 60 to 89 days past due represented only 0.5%, down from 0.6% in February 2020.
What’s more, the foreclosure inventory rate (the share of mortgages in some stage of the foreclosure process) dropped to 0.3%, down from 0.4% a year earlier.
CoreLogic notes that economic stimulus from the federal government in response to the pandemic, as well as improving employment rates enabled more borrowers to remain current on their mortgages than would otherwise have occurred.
In addition, U.S. consumers had a more optimistic economic outlook. According to a recent CoreLogic consumer survey, 8 in 10 respondents indicated they were unlikely to fall behind on their mortgage payment based on their current financial situation.
“Overall delinquency ticked up slightly in February, but the serious delinquency and foreclosure rates continued a sequential monthly decline that began in August,” says Frank Martell, president and CEO of CoreLogic. “Consumer confidence continues to rise as the economy roars back to life. These factors bode well for housing fundamentals in 2021 and as far as the eye can see.”
Frank Nothaft, chief economist at CoreLogic, points out that the slight increase in delinquencies in February might not be entirely related to the pandemic, as it has traditionally been a month where borrowers fall behind on payments.
“Some families that had overspent during the year-end holiday season, and then faced financial stress in the new year, may slip behind on a mortgage payment by February,” Nothaft says. “During each of the last five years, the 30-day delinquency rate moved higher from January to February. With economic conditions improving, we expect delinquency rates to move lower in coming months.”
The Mortgage Bankers Association’s (MBA) National Delinquency Survey, which is published quarterly, shows that mortgage delinquencies fell throughout the first quarter, reaching 6.38% of all loans as of the end of March.
“Mortgage delinquency rates continued to decrease in the first quarter of 2021, as a rebounding job market and stimulus checks helped borrowers stay current on their mortgage payments,” says Marina Walsh, vice president of industry analysis for the MBA, in a statement. “Mortgage delinquencies track closely to the U.S. unemployment rate, and with unemployment dropping from last year’s spike, many households appear to be doing better.”
Walsh noted that in the history of MBA’s National Delinquency Survey, there has never been such a substantial decline in the delinquency rate over such a short period of time. The mortgage delinquency rate peaked at 8.22% in the second quarter of 2020 and within three quarters has dropped by 184 basis points to 6.38%.
In addition, the first quarter’s early stage delinquencies – the 30-day and 60-day delinquencies combined – dropped to the lowest levels since the inception of the survey in 1979.
“Notwithstanding the welcome improvement in mortgage delinquencies and the positive job outlook, the delinquency rate this past quarter still remains 105 basis points higher than its historical quarterly average of 5.33 percent,” adds Walsh. “We continue to see seriously delinquent loans – those loans that are over 90 days past due or in the process of foreclosure – at elevated levels, particularly for FHA and VA borrowers. With extended forbearance and foreclosure moratoria still in effect, many of these borrowers are reaching later stages of delinquency. Upon exiting long-term forbearance, some borrowers – regardless of their improving employment prospects – may need more complex workout options, such as loan modifications, to remain in their homes.”