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How Do Natural Disasters Impact Delinquency Rates?

Delinquencies for the month of June were the lowest since 2006, according to the latest CoreLogic Loan Performance Insights Report. However, the report said that natural disasters could impact delinquency rates.

According to the report, 4.3 percent of home mortgages were in some stage of delinquency in June 2018, compared to 4.6 percent a year before and 4.2 percent in June 2006. CoreLogic’s overall delinquency rate includes all home loans 30 days or more past due, including those in foreclosure.

CoreLogic notes that the highest rate of delinquency in June was in 2010 when it was 11.3 percent.

According to Dr. Frank Nothaft, Chief Economist for CoreLogic, an improved job market may have contributed to the lower delinquency and foreclosure rates.

“A solid labor market enables more homeowners to remain current on their mortgage,” said Dr. Nothaft. “The national unemployment rate in June 2018 was 4 percent, the lowest for June in 18 years. While this has helped reduce delinquencies nationally, delinquency rates in areas hit by wildfires, hurricanes or other natural disasters have jumped as families deal with financial disruption and tragedy. The loss of housing and the displacement of families also tends to drive up local rents and reduce vacancies.”

Nothaft said that the risk to mortgages in the months following a natural disaster can be substantial. "After last year’s trio of hurricanes – Harvey, Irma and Maria – serious delinquency rates on home mortgages tripled in the Houston, Texas, and Cape Coral, Florida, metro areas and quadrupled in San Juan, Puerto Rico."

“Neighborhoods impacted by similar disasters in 2018 should also expect to see a spike in delinquencies in the coming year. With storms and wildfires currently impacting multiple areas of the country, homeowners, lenders, and servicers should remain vigilant of potential impacts, particularly those in California, Hawaii and the Rocky Mountain and Gulf Coast states,” said Frank Martell, President, and CEO of CoreLogic.

By state, Mississippi had the highest rate of delinquency, according to the CoreLogic report, at eight percent, while Colorado had the lowest rate at two percent.

In addition, the foreclosure inventory rate was 0.5 percent, down 0.2 percentage points from 0.7 percent in June 2017. This is also the lowest level since June 2006, below the pre-crisis level of 0.6 percent.

CoreLogic also tracks the rate at which mortgages transition from one stage of delinquency to the next. For example, when loans going from being current to 30 days past due. According to CoreLogic, 0.9 percent of mortgages transitioned from current to 30 days past due in june 2018, unchanged year over year. The report notes that in June 2007, shortly before the financial crisis, the current-to-30-day transition rate was 1.2 percent, and peaked in November 2008 at two percent.

Find the full report from CoreLogic here.

About Author: Seth Welborn

Seth Welborn is a contributing writer for DS News. He is a Harding University graduate with a degree in English and a minor in writing, and has studied abroad in Athens, Greece. An East Texas native, he also works part-time as a photographer.
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