Where Delinquency Rates Are Headed

In May, 7.3% of mortgages were at least 30 days late, according to CoreLogic. The cause? Reverberations of the recession on loan performance.

CoreLogic's latest Loan Performance Insights Report reveals that, compared to the same point last year, that 7.3% represents an increase of 3.7% in the overall delinquency rate.

U.S. mortgage performance was showing signs of sustained improvement in the months preceding the pandemic. In February, the national unemployment rate matched a 50-year floor. Meantime, the delinquency rate had experienced a 27 -month drop overall.  

That’s when things took a turn. When COVID-19 spawned into a global pandemic by May, U.S. unemployment raced past 13%. More than 4 million homeowners—accounting for more than 8% of all mortgages—were left with little choice other than to enter into a COVID-19 mortgage forbearance plan.

As 2021 winds down, CoreLogic forecasts the U.S. serious delinquency rate to quadruple. That would propel 3 million homeowners into serious delinquency without additional government programs and support.

From the previous year, each state experienced upticks in overall delinquency rates. With 6.4% bump in increases each in May, New Jersey and Nevada—both of which remain virus hotspots—had the largest overall increase.

Almost every U.S. metro area saw a minimum of a small annual hike in its overall mortgage rate. Reflecting two of the largest increases, Miami rose 9.2% and Kahului, Hawaii hit 8.8%. Odessa, Texas, with a local economy tied securely to the oil industry, registered a 9% boost.

More than 75% of all metro areas saw at least a small uptick in serious delinquency rate. Tying for the biggest bump with increases over 1.1% each were Odessa and Laredo, Texas, with McAllen and Midland, Texas, and Hattiesburg, Mississippi, each coming in with 0.7% gains. 

Meanwhile, over 75% of all metro areas logged at least a small increase in their serious delinquency rate. Odessa, Texas, and Laredo, Texas, tied for largest increase with gains of 1.1 percentage points each. McAllen, Texas; Midland, Texas; and Hattiesburg, Mississippi all followed with gains of 0.7 percentage points each.

For May, the overall delinquency rate in the nation hit its zenith since February 2014. The rate for early-stage delinquencies; which is 30–59 days past due, was 3% in May 2020. That ballooned from 1.7% in May of last year. 

In May, while 44 states saw an increase in Serious Delinquency Rate, Maine (-0.2%) was the only one to experience a small decrease in serious delinquencies.

As of May, the foreclosure inventory was 0.3%, down from 0.4% in May of last year—since at least January 1999, the lowest foreclosure rate for any month.

A total of 3.4% of mortgages transitioned from current to 30 days past due in April. That outpaced the 2% high recorded in late 2008.

“Despite the scale and suddenness of the pandemic, mortgage delinquency has yet to emerge as a major issue, thanks to government COVID-19 relief programs and other housing finance industry efforts,” said Frank Martell, President and CEO of CoreLogic.

"As the true impact of the economic shutdown during the second quarter of 2020 becomes clearer, we can expect to see a rise in delinquencies in the next 12-18 months—especially as forbearance periods under the CARES Act come to a close," he said.