Delinquencies among borrowers for past-due mortgages are soaring, a sign that Americans are struggling to pay their bills due to a wave of layoffs or lost income from the coronavirus pandemic.
Mortgage delinquencies surged by 1.6 million in April, the largest single-month jump in history, according to a report from Black Knight, a mortgage technology and data provider. The data includes both homeowners past due on mortgage payments who aren’t in forbearance, along with those in forbearance plans and who didn’t make a mortgage payment in April.
At 6.45%, the national delinquency rate nearly doubled from 3.06% in March, the largest single-month increase ever recorded, and nearly three times the prior record for a single month during the height of the financial crisis in late 2008, Black Knight said.
Get me out of here!:Americans flee crowded cities amid COVID-19, consider permanent moves
For context, it took more than 18 months before the first 1.6 million homeowners became delinquent during the Great Recession, says Andy Walden, economist and director of market research at Black Knight. And there is still potential for a second wave of delinquencies in May, he added.
“The impact of COVID-19 on the housing and mortgage markets has already been substantial," Walden says. "It will be some months before we can gauge the full extent of that impact. Whatever the ultimate scope, it is almost certain the effects will resonate for many months to come.”
The CARES Act, passed in March, allows homeowners to suspend their mortgage payments for up to a year on federally-backed mortgages. But it doesn’t protect mortgages that aren’t backed by the government, which make up about half of all mortgages in the U.S.
About 3.6 million homeowners were past due on their mortgages at the end of April, the most since January 2015 as households face financial hardship. That included the roughly 211,000 borrowers who were in active foreclosure.
The CARES Act also prevented lenders from beginning foreclosure proceedings on federally backed loans for at least 60 days after March 18.
With foreclosure moratoriums in place in response to the outbreak, both foreclosure starts and foreclosure sales, or completions, hit record lows. Starts were down more than 80% from this time last year, while foreclosure sales saw a 93% decline over the same period.
"Forbearance plans, by their very nature, are intended to assist homeowners through times of crisis until they can get back on track financially, and historically, they have proven to be broadly successful in doing so," Walden says. "Given the sheer number of mortgage holders impacted, there remains a risk that some may progress into default and foreclosure further downstream."
In the top 100 largest metropolitan areas, Miami (7.2%), Las Vegas (6.2%) and New York City (5.4%) topped the list for cities with the largest delinquency increases. Nevada was among the states with the biggest delinquency rates, climbing 5.2% to nearly 8%. New Jersey and New York followed, rising 5.1% and 4.9%, respectively.