Serious delinquencies doubled in June, as late mortgages leveled out
The seriously delinquent mortgage rate — loans 90 days or more late on their payments and those already in foreclosure — more than doubled in June both over the previous month and year, a foreboding sign for the market, CoreLogic said.
And if there isn't further government support for those affected by the pandemic, that seriously delinquent rate could nearly double again by early 2022.
That could affect the upward momentum of home prices, seen in recent months.
Millions of families could potentially lose their homes through a short sale or foreclosure. While that would bring more inventory to the market, their distressed prices could create downward pressure on overall home prices and consequently home equity, CoreLogic said.
Recently, both the Federal Housing Finance Agency and the Federal Housing Administration extended their respective moratoria on foreclosures and evictions through the end of 2020.
June's total delinquency rate was 7.1%, down marginally from May's 7.3%, but up from 4% for June 2019.
Ironically, the early-stage delinquency rate (30 to 59 days) declined in June from the same month in 2019 to 1.8% from 2.1%. It now is similar to the rate for 60 to 89 day delinquencies (1.8%, up from 0.6%) and lower than that of seriously delinquent loans.
Serious delinquencies are now at 3.4%, which is their highest point since February 2015, CoreLogic said. This is compared with May's 1.5% and June 2019's 1.3%.
"Forbearance has been an important tool to help many homeowners through financial stress due to the pandemic," CoreLogic President and CEO Frank Martell said in a press release.
"While federal and state governments work toward additional economic support, we expect serious delinquencies will continue to rise — particularly among lower-income households, small business owners and employees within sectors like tourism that have been hard hit by the pandemic," he added.
The 90-day to 119-day-late subset is at its highest level in nearly 21 years, CoreLogic Chief Economist Frank Nothaft pointed out, adding, "Between May and June, the 90-day delinquency rate quadrupled, jumping from 0.5% to 2.3%, following a similar leap in the 60-day rate between April and May." In June 2019, this group had a 0.3% delinquency rate.
The states that topped the list for largest gain in the seriously delinquent rate are or were COVID-19 hotspots, led by New Jersey (up 3.7 percentage points), New York (up 3.6 percentage points), Nevada (up 3.4 percentage points) and Florida (up 3 percentage points).