Mortgage Delinquencies Hit 12-Year Low, But Risks Loom

The U.S. mortgage delinquency rate (30 days or more past due but not in foreclosure) fell to 4% in August, the lowest in more than 12 years, according to CoreLogic.

That’s down from 4.6% in August 2017.

The rate for early-stage delinquencies – defined as 30 to 59 days past due – was 1.8%, down from 2% in August 2017.

The share of mortgages that were 60 to 89 days past due was 0.6%, down from 0.7% in August 2017.

The serious delinquency rate – defined as 90 days or more past due, including loans in foreclosure – was 1.5%, down from 1.9% a year earlier.

It was the lowest serious delinquency rate for August since 2006 when it was 1.4%.

What’s more, it was the lowest serious delinquency rate for any month since March 2007, when it was 1.5%.

As of August, the foreclosure inventory rate – which measures the share of mortgages in some stage of the foreclosure process – was 0.5%, down 0.1 percentage point compared with August 2017.

The foreclosure inventory rate had been basically flat for the previous three months – but nonetheless it was at the lowest level since September 2006.

“With home-price growth building owners’ equity, and the low national unemployment rate providing opportunities for income growth, further declines in U.S. delinquency and foreclosure rates are likely in coming months,” says Frank Nothaft, chief economist for CoreLogic, in a statement. “The CoreLogic Home Price Index for the U.S. recorded 5.7 percent annual growth in August. This price gain helped the average homeowner build about $16,000 in equity during the prior year and reduces the likelihood of a borrower transitioning from delinquency to foreclosure.”

Still, there is some risk that delinquencies related to the recent hurricanes and wildfires – as well as other factors – will boost the overall rate in the months to come.

Frank Martell, president and CEO of CoreLogic, says “risks that create loan default like natural disasters, overvalued markets and an eventual rise in unemployment remain in the market.”

“CoreLogic Market Conditions Indicator data has identified more than one-third of metropolitan areas are overvalued, putting them at risk of price declines and rising delinquencies if local job losses should occur,” Martell says.

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