The delinquency rate for mortgage loans on one-to-four-unit residential properties increased to a seasonally adjusted rate of 8.22 percent of all loans outstanding at the end of the second quarter of 2020, according to the Mortgage Bankers Association’s (MBA) National Delinquency Survey. The delinquency rate increased 386 basis points from the first quarter of 2020 and was up 369 basis points from one year ago.
For the purposes of the survey, MBA asks servicers to report loans in forbearance as delinquent if the payment was not made based on the original terms of the mortgage.
“The COVID-19 pandemic’s effects on some homeowners’ ability to make their mortgage payments could not be more apparent. The nearly 4 percentage point jump in the delinquency rate was the biggest quarterly rise in the history of MBA’s survey,” said Marina Walsh, MBA’s Vice President of Industry Analysis. “The second quarter results also mark the highest overall delinquency rate in nine years, and a survey-high delinquency rate for FHA loans.”
Added Walsh, “There was also a movement of loans to later stages of delinquency, with the 60-day delinquency rate reaching a new survey-high, and the 90+-day delinquency rate climbing to its highest level since the third quarter of 2010. On a more positive note, 30-day delinquencies dropped in the second quarter, which is an indication that the flood of new delinquencies may be dissipating.”
Mortgage delinquencies track closely with the availability of jobs. The five states with the largest quarterly increases in delinquency rates were New Jersey, Nevada, New York, Florida, and Hawaii – all with a prevalence of leisure and hospitality jobs that were especially hard-hit by the COVID-19 pandemic.
“The job market has improved over the past three months, with the unemployment rate falling for the third straight month from an April peak of 14.7 percent to 10.2 percent in July. This bright spot in the jobs picture is tempered by numerous uncertainties, including the ambiguous status of enhanced unemployment benefits and other stimulus measures, the recent surge in new COVID-19 cases, and the retrenchment from reopening in certain states,” said Walsh. “And there is no way to sugarcoat a 32.9 percent drop in GDP during the second quarter. Certain homeowners, particularly those with FHA loans, will continue to be impacted by this crisis, and delinquencies are likely to stay at elevated levels for the foreseeable future.”
Added Walsh, “Fortunately, there are several mitigating factors that make this current spike in mortgage delinquencies different from the Great Recession. These factors include home-price gains, several years of home equity accumulation, and the loan deferral and modification options that present alternatives to foreclosure for distressed homeowners.”