Coronavirus causes March mortgage defaults to rise
After two months of default totals sitting at 15-year lows, the number of mortgaged properties in default or foreclosure rose in March, according to Black Knight. It marked the first time default rates notched an increase in March since the turn of the century, said the company, which credited COVID-19's economic impact for the spike.
Default or in-foreclosure properties totaled over 2.01 million in March, with 37,000 added month-over-month. There were 155,000 fewer defaults in March 2020 than there were at the same time last year, its First Look report noted.
Historically, mortgage performance improves most in March from February due to an influx of tax refunds rolling in, helping borrowers recover on outstanding payments. However, the negative effects of the pandemic started in the middle of the month and delinquencies grew by 3.33% from February. The overall loan delinquency rate — measured as loans at least 30 days late on their payment but not yet in foreclosure — went to 3.39% for the month. Black Knight anticipates significant jumps in the coming months.
Mississippi had the highest percentage of noncurrent mortgages at 9.08%, which actually dropped 11.39% from the year prior. Louisiana came next at 7.54%, down 5.03% from the year before; Alabama, 6.2%, down 9.75%; West Virginia, 5.9%, down 6.61%; and Arkansas, 5.34%, down 10.05%.
On the other side of the spectrum, Colorado had the smallest share of noncurrent loans at 1.79%, down 6.32% from the same month the year before. Washington followed with 1.81%, down 17.11%; Idaho, 1.88%, down 16.63%; Oregon, 1.95%, down 10.07%; and California, 2.16%, down 8.45%.
Conversely, foreclosure starts decreased to the lowest level on record with help from coronavirus moratoriums. Properties entering the foreclosure inventory totaled 27,600 units, d14.55% month-to-month and 30.48% year-to-year.
The decades-low interest rate landscape drove prepayments up by 39.68% from February and 125.24% from March 2019. March's prepayment rate of 1.89% is a six-year high.