The nation’s serious delinquency rate vaulted to 2.3% in June, reaching its highest level since February 2015, according to CoreLogic.
The share of mortgages in serious delinquency — defined as 90 days or more past due — had grown to 1.5% in May as the ongoing COVID-19 pandemic continued to cause economic strain to many Americans across the country. Prior to May, the serious delinquency rate reached or remained at its lowest level since June 2000 for five consecutive months.
Year over year, June’s serious delinquency rate was up from 1.3% in June 2019, following the prior month’s annual increase from 1.3% in May 2019 to 1.5% in May 2020. May’s year-to-year jump was the first annual increase in the serious delinquency rate since November 2010.
June’s big increase in seriously delinquent loans follows the previous month’s spike in mortgages 60 to 89 days past due. The share of those loans ballooned from 0.7% in April to 2.8% in May as the coronavirus pandemic stretched on, and many of those loans continued to transition into serious delinquency. The transition rate from loans 60 days past due to 90 days past due was 75.5% in June, dwarfing the 30.4% transition rate of such loans during the same month last year. Indeed, the share of mortgages 90 to 119 days past due — the earlier stages of serious delinquency — increased to its highest level in more than 21 years.
Unfortunately, the surging serious delinquency rates of the past two months could be just the tip of the iceberg. With economists anticipating unemployment to stay high through the rest of the year, CoreLogic predicts that serious delinquency rates could nearly double from June’s level by early 2022, barring additional support from the government.
“Forbearance has been an important tool to help many homeowners through financial stress due to the pandemic,” said Frank Martell, president and CEO of CoreLogic. “While federal and state governments work toward additional economic support, we expect serious delinquencies will continue to rise — particularly among lower-income households, small business owners and employees within sectors like tourism that have been hard hit by the pandemic.”
A look at June’s serious delinquency rates by metro area further illustrates the stress placed on homeowners employed in hard-hit sectors. Of the 10 largest core-based statistical areas tracked by CoreLogic, Miami-Fort Lauderdale-West Palm Beach, with a large share of its population employed in tourism and hospitality, posted the highest serious delinquency rate at 7.1%, almost five percentage points above the national average. Other destinations like New York (6.7%) and Las Vegas (5.3%) has similarly elevated shares of serious delinquency.
The good news is that while serious delinquency surged, overall delinquency took a step back. After reaching its highest level since 2014 in May, the overall delinquency rate retreated monthly in June, down to 7.1% from 7.3%. The overall delinquency rate was still up year-over-year in June, logging an increase of 3.1 percentage points from June 2019.
The share of mortgages that were 30 to 59 days past due was 1.8% in June, down from 2.1% in June 2019. The share of mortgages 60 to 89 days past due was also 1.8% in June, up from 0.6% in June 2019 and down from May’s aforementioned 2.8% rate.
And while serious delinquencies are on the rise, transitions from delinquency to foreclosure have so far remained under control. The foreclosure inventory rate — the share of mortgages in some stage of the foreclosure process — remained low in June at 0.3%. That’s down from 0.4% from June 2019.