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Serious mortgage delinquencies soared to a 10-year high last month

Quicken Loans, and other mortgage lenders, are facing a growing number of borrowers who are seriously behind on their payments. (Emily Elconin/Bloomberg)

Overall mortgage delinquency numbers are improving, but the delinquency rate for homeowners who are seriously behind in their payments is soaring, another indication of a bifurcated housing market.

The number of borrowers delinquent on their mortgages fell by 340,000 in July, a 9 percent drop from June, according to data released Friday by Black Knight, a mortgage data and technology company. (Black Knight counts all homeowners who are delinquent, regardless of whether they are in a forbearance plan.)

But the number of homeowners who were at least 90 days behind on their payments grew by 376,000 last month, a 20 percent increase from June. Serious delinquencies are now 1.8 million higher than pre-pandemic levels and are at their highest level since early 2010.

“The good news is that overall delinquencies are trending downward and, in fact, the number of newly delinquent homeowners has fallen far below pre-pandemic levels,” Andy Walden, Black Knight economist and director of market research, wrote in an email. “However, while this indicates that the inflow of new covid-19-related delinquencies has subsided, the number of homeowners who have missed three or more payments is now at a 10-year high.

More than 85 percent of these borrowers were in forbearance as of the end of July, making clear that “economic distress from the pandemic continues to impact their ability to make mortgage payments,” he said. “It remains to be seen how those loans will perform as we move on into the fall.”

Foreclosures also ticked up, despite moratoriums still in place.

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Mortgage delinquencies track closely with unemployment. States that have been hard hit with job losses, particularly in the leisure and hospitality industry, are the ones facing the highest numbers of borrowers behind on their payments. The top five states with borrowers who are not current on their mortgages are Mississippi, Louisiana, New York, Hawaii and New Jersey. The top five states with borrowers who have serious delinquencies are Mississippi, Louisiana, Nevada, New Jersey and Alaska.

A survey of Mortgage Bankers Association members also found that delinquencies spiked in the second quarter. The MBA releases its data on a quarterly basis, while Black Knight issues its data monthly.

The delinquency rate for loans on one-to-four-unit residential properties increased to a seasonally adjusted rate of 8.22 percent of all loans at the end of the second quarter, according to the MBA’s national delinquency survey. Like Black Knight, the MBA includes loans in forbearance.

“The COVID-19 pandemic’s effects on some homeowners’ ability to make their mortgage payments could not be more apparent,” Marina Walsh, the MBA’s vice president for industry analysis, said in a statement. “The nearly 4 percentage point jump in the delinquency rate was the biggest quarterly rise in the history of MBA’s survey. The second quarter results also mark the highest overall delinquency rate in nine years, and a survey-high delinquency rate for FHA loans.”

Many borrowers won't have to make up missed mortgage payments all at once

The MBA also noted the rise in seriously delinquent mortgages.

“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-plus-day delinquency rate climbing to its highest level since the third quarter of 2010,” Walsh said. “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.”

Although the data rouses fears of what befell the housing market in 2008, Walsh tamped down those concerns.

“Fortunately, there are several mitigating factors that make this current spike in mortgage delinquencies different from the Great Recession,” Walsh said. “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.”