Mortgage Delinquencies Drop Again As An Uptick In Distressed Sales Looms

Despite many foreclosure moratoriums ending in December 2021, the national foreclosure rate remained flat from December to January 2022, and the overall delinquency rate dropped to another historic low, according to a new CoreLogic loan performance insights report.

While government supports and a build-up in equity have helped many avoid foreclosure to-date, the U.S. can expect to see an uptick in distressed sales throughout the year as some homeowners struggle to regain footing post-forbearance.

In January, 3.3% of all mortgages in the U.S. were in some stage of delinquency (30 days or more past due, including those in foreclosure), representing a 2.3 percentage point decrease compared to January 2021, when it was 5.6%. This again marks the lowest recorded overall delinquency rate since at least January 1999.

To gain a complete view of the mortgage market and loan performance health, CoreLogic examines all stages of delinquency. In January 2022, the delinquency and transition rates and their year-over-year changes, were as follows:

  • Early-Stage Delinquencies (30 to 59 days past due): 1.2%, down from 1.3% in January 2021.
  • Adverse Delinquency (60 to 89 days past due): 0.3%, down from 0.5% in January 2021.
  • Serious Delinquency (90 days or more past due, including loans in foreclosure): 1.8%, down from 3.8% in January 2021 and a high of 4.3% in August 2020.
  • Foreclosure Inventory Rate (the share of mortgages in some stage of the foreclosure process): 0.2%, down from 0.3% in January 2021.
  • Transition Rate (the share of mortgages that transitioned from current to 30 days past due): 0.7%, unchanged from January 2021.

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The drop in the nation’s overall mortgage delinquency rate in January marked the 10th consecutive month of year-over-year declines. According to CoreLogic, this trend can be attributed to two familiar factors: escalating home prices and a strong job market. Home prices continue to reach new highs, posting 20% year-over-year growth in February. Meanwhile, the latest jobs report shows that the country added an average of 562,000 positions per month in the first quarter of 2022.

While the foreclosure rate declined compared to January 2021, the expiration of moratoriums in some states caused the number of foreclosures to rise from December 2021. Nevertheless, the January 2022 foreclosure rate was flat from December and is still the lowest recorded since at least 1999.

“The large rise in home prices — up 19% in January from one year earlier, according to CoreLogic indexes for the U.S. — has built home equity and is an important factor in the continuing low level of foreclosures,” said CoreLogic’s chief economist Frank Nothaft. “Nonetheless, there are many homeowners that have faced financial hardships during the pandemic and are emerging from 18 months of forbearance. The U.S. may experience an uptick in distressed sales this year as some owners struggle to remain current after forbearance and loan modification.”

State and metro takeaways

  • In January, all states logged year-over-year declines in their overall delinquency rate. The states with the largest declines were: Nevada (down 3.7 percentage points), Hawaii (down 3.5 percentage points) and New Jersey (down 3.2 percentage points). The remaining states, including the District of Columbia, registered annual delinquency rate drops between 3.1 percentage points and 1.0 percentage points.
  • All U.S. metro areas posted at least a small annual decrease in overall delinquency rates, including those that were previously affected in the aftermath of Hurricane Ida last fall. The top four metros with the largest declines were: Odessa, Texas (down 6.3 percentage points); Kahului-Wailuku-Lahaina, Hawaii (down 6.1 percentage points); Laredo, Texas (down 5.9 percentage points); and Lake Charles, Louisiana (down 5.8 percentage points).

Nothaft said, “Nonfarm employment grew by 6.7 million workers during 2021, the largest one-year increase, supporting income growth and keeping more families current on their loans. Nonetheless, places hit hard by natural disasters have experienced a spike in missed payments. Serious delinquency rates for December in southern Louisiana’s Houma-Thibodaux metro area were nearly two percentage points higher than immediately before Hurricane Ida.”

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