The percentage of homeowners who fell a month or two behind on their mortgage payment hit a 21-year high in April, as the coronavirus pandemic forced states across the country to shut down and millions of Americans out of work.
That spike caused the overall mortgage delinquency rate to jump to 6.1% from 3.6% in March, interrupting 27 straight months of declines, according to a report from CoreLogic, a business intelligence and analytics firm. But seriously delinquent loans — those 90 or days more overdue — remained at their lowest level since June 2000.
The rise in early-stage delinquencies may be just the beginning of a bigger increase, as government aid runs out and the full brunt of the fallout from the COVID-19 outbreak ripples through the economy.
“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, in the report.
“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.
‘This is what we were expecting to see’
Early-stage delinquent loans, those characterized by payments past due from 30 to 59 days, rose to 4.2%, CoreLogic reported. A year ago, the rate was 1.7%. The rate that current loans became 30-days past due was also at the highest level since 1999, the report found.
The numbers don’t come as a surprise to Selma Hepp, deputy chief economist at CoreLogic, especially since increases in delinquencies occurred in states where service industries are prominent and experienced the worst job losses and furloughs.
Hepp said the spike also comes after the CARES Act, which allowed American homeowners with a financial hardship and a mortgage backed by a government agency to suspend payments up to 12 months.
“I would say this is what we were expecting to see,” Hepp said. “The areas that have jumped in delinquencies such as New Jersey and Florida are really depending on major hospitality [industries].”
Atlantic City, New Jersey, and Miami were top cities that saw an increase in year-over-year delinquency rates. Both were up 6.7 and 5.4 percentage points, respectively, CoreLogic found.
“Atlantic City is a hospitality spot so you know any area where you have a lot of tourism,” Hepp said, “the unemployment claims have jumped significantly.”