Mortgage market is finally turning a corner around default rates

For the first time since March 2020, the overall mortgage default rate in the country has fallen from the previous year. While at the local level some areas still suffer from job losses and natural disasters, the country is moving towards restored financial health for borrowers.

CoreLogic, a global provider of real estate information, analytics and data-enabled solutions, today released its monthly Loan Performance Insights report for April 2021.

In April, 4.7% of all US mortgages were at some stage of delinquency (30 days or more past due, including those in foreclosure), representing a 1.4 percentage point decrease in delinquency compared to April 2020 , when it was 6.1%. This month’s total delinquency rate is the lowest rate in a year.

To get an accurate picture of the mortgage market and the health of loan performance, CoreLogic examines all stages of delinquency. In April 2021, the default and transition rates, and their year-over-year changes, were as follows:

· Delinquent receivables at an early stage (30 to 59 days past due): 1%, down from 4.2% in April 2020.

· adverse delinquency (60 to 89 days past due): 0.3%, down from 0.7% in April 2020.

· Serious delinquency (90 days or more past due, including loans under foreclosure): 3.3%, up from 1.2% in April 2020.

· Foreclosure stock rate (the share of mortgages in a certain phase of the foreclosure process): 0.3%, unchanged from April 2020.

· Transition rate (the proportion of mortgages that have moved from pending to 30 days past due): 0.6%, down from 3.4% in April 2020.

CoreLogic’s data for April 2021 reports the first year-over-year decline and lowest overall default rate since the start of the pandemic, as job and income recovery allows more homeowners to stay or return to their current mortgage payment status.

In addition, in an effort to help borrowers who are in forbearance programs, financial institutions and government agencies continue to enact provisions that give homeowners ample opportunity to come back and keep their homes.

“The sharp rebound in the economy, as well as a powerful combination of fiscal and regulatory aid from government, is fueling unprecedented demand for housing and enabling people to buy and stay in their homes,” said Frank Martell, president and CEO. from CoreLogic. “The decline in default rates is a further manifestation of the benefits of this tailwind. Barring an unforeseen change, we expect interest rates to continue to fall and house prices to rise over the next 12 to 18 months.”

“Natural risks and job losses in the oil and gas industry over the past year continue to affect local default rates, despite an overall decline in default rates in many urban areas,” said Frank Nothaft, chief economist at CoreLogic. “Of all the subways, Odessa and Midland, Texas, had the largest one-year jumps in serious delinquency rates, followed by Lake Charles, Louisiana, which was hit hard by Hurricanes Laura and Delta in 2020.”

Takeaways in the State and Subway

In April, nearly all states recorded a decline in the annual general default rate (only Wyoming experienced a slight increase with a 0.1 percentage point increase), and a significant portion of metropolitan cities recorded at least a small annual decline, with only eight experiencing a annual increase.

· Among the subways, Odessa, Texas, which is still recovering from job losses in the oil industry, had the largest annual increase in payment defaults at 2.4 percentage points.

· Other metropolitan areas with significant increases in delinquency include Midland, Texas (+2.3 percentage points); Lake Charles, Louisiana (+0.8 percentage point); Enid, Oklahoma (+0.7 percentage point) and Casper, Wyoming (+0.6 percentage point).

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