CoreLogic, a property data provider based in Irvine, Calif., said Tuesday the national mortgage delinquency rate reached 5.6% in January 2021, up from 3.5% in January 2020 – but down from a recent peak of 7.3% in May 2020 as climbing unemployment rates and federal stimulus funds appear to be working their way into the housing economy.
The delinquency rate for January 2021 marked the lowest such figure since the onset of the pandemic – a 6.1% rate in April 2020.
The rate for “early-stage delinquencies” (those between 30 to 59 days past due) slipped to 1.3% in January 2021 from 1.7% in January 2020; while the “adverse delinquency” rates (60 to 89 days past due) edged down to 0.5% in January 2021 from 0.6% in January 2020.
“Serious delinquency” rates (90 days or more past due, including loans that are in foreclosure) rose to 3.8% in January 2021, up from 1.2% in January 2020, but has fallen from a 4.3% peak in August 2020.
The foreclosure inventory rate (the percentage of mortgages which are in some stage of the foreclosure process) was at 0.3% in January 2021, down from 0.4% in January 2020.
The “transition rate” (the percentage of mortgages that “transitioned” from being current on payments to 30 days past due) edged up to 0.7% in January 2021, from 0.6% in January 2020 — another hopeful sign that family finances are beginning to improve, stated Frank Nothaft, chief economist at CoreLogic.
“As different areas of the economy and the country began reopening in the middle of 2020, the unemployment rate began falling significantly. As more people returned to work and incomes bounced back, homeowners were able to resume making mortgage payments and began to exit forbearance,” Greg McBride, chief financial analyst at Bankrate.com, told Forbes.
The gradual decline in mortgage delinquency rates since late last spring has generally tracked the drop in the national jobless rate – between May 2020 and January 2021, the unemployment rate has fallen from 13.3% to 6.3%, while the delinquency rate has dropped from 7.3% to 5.6% over that period. While all states have seen their overall delinquency rates increase in January over the past 12 months, CoreLogic said the biggest jumps were witnessed in Hawaii and Nevada (up by 4.2% to 7% and 4.1% and 6.9%, respectively), largely due to their heavy dependence on tourism, a sector that has been slow to recover. Tourism- and hospitality-dependent Florida and Alaska were also among the five states that saw the biggest increases in delinquency rates. Selma Hepp, deputy chief economist at CoreLogic, told Forbes that easing early and adverse-stage delinquencies reflect a “recovering economy and a rebound in employment.”
CoreLogic estimated that recent decisions by the the Federal Housing Finance Agency to extend the forbearance (a reduction or pause in mortgage payments) on Government-Sponsored Enterprise loans under the The Coronavirus Aid, Relief, and Economic Security (CARES Act) by up to six months meant that about 2.1 million borrowers will have more time to pay their mortgages. “The extensions will provide many struggling borrowers who have not been able to keep up with their regular mortgage payments with continued payment relief, as well as adding time to regain their financial footing,” CoreLogic added.
18 million. That’s how many Americans are still drawing some form of unemployment compensation, Greg McBride, chief financial analyst at Bankrate.com, told Forbes — and coming into 2021, more than 40% of all households reported their income was lower than pre-pandemic levels.
What To Watch For
McBride also said as homeowners in forbearance or behind on their bills resume making payments or work out permanent payment modifications, delinquencies will continue to decline. “However, the concern surrounds the roughly 14% of those exiting payment relief that are behind and have no plan [to make payments] in place,” he cautioned. “While this represents less than 1% of all mortgages, this is where the risk of future default is highest.”
CoreLogic said Idaho, South Dakota, and Wisconsin had the lowest state-level delinquency rates in January 2021. “Generally, the areas with fewer job losses and strong housing markets over the last year have seen lower delinquencies as homeowners either didn’t lose their jobs or took advantage of strong housing demand to sell their home prior to falling behind on payments,” Hepp explained.
While the 7.3% figure for national overall delinquency in May 2020 seems rather high – it remains well below the 12% figure from December 2009 (the peak since CoreLogic started measuring this metric in 1999) during the financial and housing crisis.