Home prices, jobs keeping mortgage defaults at bay

There will be fewer mortgage loans going into default in the next year as home prices continue to rise and more people get jobs, CoreLogic said.

There were 4.5% of mortgages in some stage of delinquency (30 days or more past due including those in foreclosure) in June 2017. May's delinquency rate was 4.5%, while for June 2016, the rate was 5.3%.

June's foreclosure inventory rate of 0.7% was the lowest in nearly 10 years, when it was also 0.7% in July 2007. The index peaked at 3.6% in December 2010.

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"The CoreLogic Home Price Index increased 6% and payroll employment grew by 2.2 million jobs in the year ending June 2017, supporting further declines in delinquency rates," said CoreLogic Chief Economist Frank Nothaft in a press release. "The forecast for the coming year includes 5% home-price appreciation and further job growth, putting renewed downward pressure on mortgage delinquency rates."

Rising home prices give those who fall behind on their loans an opportunity to sell the property and have enough in proceeds to pay off the mortgage.

The percentage of seriously delinquent mortgages was 1.9%, down from 2.5% in June 2016.

Mortgages with payments between 30-59 days past due, was 2% in June, down slightly from 2.1% one year prior. There were 0.6% of mortgages whose payments were between 60 and 89 days late, compared with 0.7% a year ago.

The share of mortgages that transitioned from being current for the previous month to becoming 30 days past due during June was 0.9%. This was unchanged from June 2016.

By comparison, in January 2007, just before the start of the financial crisis, the current-to-30-day-transition rate was 1.2% with the peak occurring in November 2008 at 2%.

Mississippi had the highest delinquency rate in June, at 8.2%, followed by New Jersey at 7% and New York at 6.9%.

Because of property damage from Hurricane Harvey in Texas and Hurricane Irma in Florida, the delinquency rates for those states are likely to increase. In June, Texas had a 5% delinquency rate, while Florida's delinquency rate was 5.2%.

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