Total delinquency rates dropped 4.2 percent in July, 2.3 percentage points lower than the 6.5 percent observed in July 2020 and significantly closer to the 3.2 percent rate seen in March 2020, according to the new data. In the previous month, the same number stood at 4.4 percent.
“Declining delinquency levels are an encouraging sign of economic improvement and the durability of the housing market,” CoreLogic CEO Frank Martell said in a statement. “Looking ahead to the end of many forbearance and other assistance programs, many borrowers receiving support must consider their financial options, including a potential loan modification, to ensure they stay current and keep foreclosures at bay.”
Delinquency rates fell in every U.S. state while New Jersey (3.9 percentage-point drop), Florida (3.5 percentage-point drop) and Nevada (3.3 percentage-point drop) experienced the biggest declines.
Miami, Laredo, Texas and Kingston, New York saw the most significant declines among urban areas, dropping 5.4 percent, 5.1 percent and 5 percent, respectively.
Adverse Delinquency (60 to 89 days past due date) are down to 0.3 percent from 1 percent while serious delinquencies (late by more than 90 days) are down to 2.8 percent from 4.1 percent. Early delinquencies (30 to 59 days past due) are down to 1.1 percent from 1.5 percent while foreclosures, or having one’s home seized entirely due to missed payments, are down to 0.2 percent from 0.3 percent.
Overall, the numbers are encouraging, with the number of homes lost due to unemployment or missed mortgage payments less significant than originally predicted near the beginning of the pandemic. A range of government forbearance programs have kept many afloat following job loss while rapidly rising home prices have helped transform homes into financial buffers.
“Even if loan modification or income recovery is unable to help delinquent homeowners become and remain current on their payments, the double-digit rise in home prices may help them avoid a distressed sale,” Dr. Frank Nothaft, chief economist at CoreLogic, said in a statement. “Homeowners with substantial home equity are far less likely to experience a foreclosure sale, and fortunately, the CoreLogic Home Equity Report found the average owner gained $51,500 in equity in the past year — a five-fold annual increase.”
According to Black Knight’s latest Mortgage Monitor report, there were nearly 1.6 million homeowners in pandemic-related forbearance plans in September, and many of those borrowers will be reaching their 18-month program limits this year. Black Knight estimates that high-equity borrowers are more than 40 percent less likely to lose their home through a foreclosure, deed-in-lieu, or short sale than those with weaker equity positions.
Loan servicers are required to reach out to borrowers who are 120 days behind on their payments and give them a chance to apply for assistance, such as a loan modification, before initiating foreclosure proceedings.