While the national default rate has not returned to the 3.5 percent rate it was before the pandemic began, the percentage of loans that are 30 or more days past due has been down 2.6 points since May 2020, according to CoreLogic sunk. The company reports the rate in May 2021, it was 4.7 percent compared to 7.3 percent in May last year.
Frank Martell, President and CEO of Corelogic, said, “The pandemic has created many challenges however, in the case of payment defaults, the effects were relatively minor thanks to numerous government subsidy programs and the significant economic recovery of the last few quarters. Looking ahead, we expect a resilient economy and near zero interest rates to keep default rates at reasonable levels. “
Most of the year-over-year decline is due to early-stage arrears where homeowners are 30 to 59 days past due and adverse defaults that are 60 to 89 days past due. The previous bucket, which accounted for 3.0 percent of all mortgage loans in May 2020, had fallen to 1.2 percent by May of this year, while the negative delinquency bucket improved from 2.8 percent to 0.3 percent.
Heavily overdue loans that are 90 days or more past due, including those in foreclosure, are still 3.2 percent up from 1.5 percent a year earlier. but that’s still the lowest rate since June 2020. Serious payment defaults peaked at 4.3 percent in August 2020.
The foreclosure portfolio, loans in foreclosure, is unchanged from the previous year at 0.3 percent. This is due to the ongoing moratorium on foreclosures from GSE and government guaranteed loans.
In addition, fewer loans are in default. CoreLogic put the transition rate, the proportion of mortgages that were overdue from current to 30 days in May, at 0.7% compared to 2.2% in May 2020.
The company says: “Many are concerned about an impending foreclosure crisis if government regulations are lifted. Fortunately, the average homeowner has the patience with sizeable equity in their home, which has helped create an additional financial buffer for those struggling with mortgage payments. With those strong equity gains and the availability of loan modifications and federal funding, we expect most borrowers to have had enough support to stave off a wave of foreclosures. In addition, a recent CoreLogic survey of mortgage owners found that 85 percent of respondents said they kept their jobs during the pandemic, which has helped many homeowners avoid delinquency and prevent a widespread mortgage crisis.
The improvement in the total number of defaults was seen in all states and metropolitan areas. The largest falls among the states were in New Jersey (–4.8 percentage points), New York (4.2 points) and Florida (4 points). On the subways, Miami led with a drop of 6.5 points, followed by Kingston, New York and Atlantic City, New The jersey lost 5.5 and 5.4 points, respectively.