Reasons for Optimism Despite Increased Delinquencies

CoreLogic releases monthly reports on delinquencies and loan performance for U.S. mortgages. The company on Tuesday published data covering September 2020, which show that, nationwide, 6.3% of mortgages are 30-plus days past due.

Numbers reported in CoreLogic's Loan Performance Insights, which include mortgages in foreclosure, represent a 2.5-percentage point increase in the overall delinquency rate compared to September a year ago, when it was 3.8%.

“Although delinquencies remain high, it’s clear the economy has passed an initial stress test. High home equity balances and structural protections put in place as a result of the Great Recession contributed to surviving this test," CoreLogic's President and CEO Frank Martell said. "Housing demand remains strong, and rates low, which provides optimism that the housing market will continue to be a bright spot in this COVID-ravaged economy.”

The rate and stages of delinquencies, according to CoreLogic, break down as follows:

• Early-Stage Delinquencies (30 to 59 days past due): 1.5%, down from 1.9% in September 2019, and down from 4.2% in April when early-stage delinquencies spiked.
• Adverse Delinquency (60 to 89 days past due): 0.7%, up from 0.6% in September 2019, but down from 2.8% in May, when adverse-stage delinquencies peaked.
• Serious Delinquency (90 days or more past due, including loans in foreclosure): 4.2%, up from 1.3% in September 2019, but down slightly from 4.3% in August.
• Foreclosure Inventory Rate (the share of mortgages in some stage of the foreclosure process): 0.3%, down from 0.4% in September 2019. The September 2020 foreclosure rate has stayed at 0.3% for six consecutive months, which was the lowest since at least January 1999.
• Transition Rate (the share of mortgages that transitioned from current to 30 days past due): 0.8%, unchanged from September 2019. The transition rate has slowed since April 2020, when it peaked at 3.4%.

Homeowners who lapsed on mortgages in earlier 2020 "continue to move through the delinquency funnel," note the report's authors. Foreclosures remain low, due to government intervention through the CARES Act and the Frank-Dodd Act aimed at protecting consumers from risky lending practices. Serious delinquencies, those 90-plus days past due, have leveled out for the first month since April, according to the survey. According to CoreLogic, a record amount of home equity fueled by rapid home price growth, also provides a buffer against both delinquency and foreclosure.

"Our analysis of CoreLogic public records shows that more than one-half of all home mortgage loans created since the onset of the pandemic have been no-cash-out refinance,” said Dr. Frank Nothaft, CoreLogic's Chief Economist.“By reducing their mortgage rate with these types of loans, homeowners have been lowering both their interest expense and risk of delinquency.”

By state, each of them in September reported an annual increase in overall delinquency rates, the report covering September showed.

For months, popular tourism destinations showed the highest increases, with Nevada (up 4.9 percentage points), Hawaii (up 4.7 percentage points), and Florida (up 4 percentage points) again topping the list for gains in September.

Indeed, nearly every metro area logged an increase in overall delinquency.

Lake Charles, Louisiana, where Hurricane Laura hit in August, experienced the largest annual increase of 10.7 percentage points. Other metro areas with significant overall delinquency increases included Odessa, Texas (up 10.3 percentage points), Midland, Texas (up 7.9 percentage points), and Kahului, Hawaii (up 7.5 percentage points).

The next CoreLogic Loan Performance Insights Report featuring data for October 2020 will be released on January 12, 2021. For ongoing housing trends and data, visit the CoreLogic Insights Blog at corelogic.com/insights.