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Predicting Homeowner Delinquency Risk

February marked the 26th consecutive month of falling annual overall delinquency rates, according to CoreLogic. However, as the coronavirus (COVID-19) pandemic continues to impact the economy, and claims for unemployment insurance reach record highs, homeowners are at an increased risk of becoming delinquent in the coming months. The nation's overall delinquency rate was the lowest for a February in at least 20 years. In that month, 3.6% of mortgages were delinquent by at least 30 days or more including those in foreclosure. This represents a 0.4% decline in the overall delinquency rate compared with February 2019.

"Delinquency and foreclosure rates were at a generational low in February as the U.S. unemployment rate matched a 50-year low," said Frank Nothaft, Chief Economist for CoreLogic. "However, the pandemic-induced closure of nonessential businesses caused the April unemployment rate to spike to its highest level in 80 years and will lead to a rise in delinquency and foreclosure. By the second half of 2021, we estimate a four-fold increase in the serious delinquency rate, barring additional policy efforts to assist borrowers in financial distress."

In February, for the fifth consecutive month, no states posted a year-over-year increase in the overall delinquency rate, and Mississippi and Maine (both down 0.9 percentage points) recorded the largest declines. Only four metropolitan areas recorded small increases in overall delinquency rates and eight recorded increases in serious delinquency rates.

“After a long period of decline, we are likely to see steady waves of delinquencies throughout the rest of 2020 and into 2021," said Frank Martell, President and CEO of CoreLogic. "The pandemic and its impact on national employment is unfolding on a scale and at a speed never before experienced and without historical precedent. The next six months will provide important clues on whether public and private sector countermeasures—current and future—will soften the blow and help us avoid the protracted, widespread foreclosures and delinquencies experienced in the Great Recession.”

The share of mortgages that transitioned from current to 30-days past due was 0.9% in February 2020, down from 1% in February 2019. By comparison, in January 2007, just before the start of the financial crisis, the current-to-30-day transition rate was 1.2% and peaked in November 2008 at 2%.

About Author: Seth Welborn

Seth Welborn is a Reporter for DS News and MReport. A graduate of Harding University, he has covered numerous topics across the real estate and default servicing industries. Additionally, he has written B2B marketing copy for Dallas-based companies such as AT&T. An East Texas Native, he also works part-time as a photographer.
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