[COVID-19] Mortgage Delinquency Rate Spikes in April

Black Knight released a report last week reflecting that mortgage delinquencies rose by 1.6 million in April, resulting in a national delinquency rate of 6.45%.

The April delinquency rate is more than twice the rate of 3.06% for March. The April increase is far and away the largest month over month jump in delinquencies that our country has ever seen, more than tripling the next highest increase which occurred in 2008.

Black Knight is a mortgage technology and data provider. The delinquency data reflects both delinquent homeowners who are not in forbearance, as well as those in a forbearance plan but failed to make their April payment.

At the end of April, approximately 3.6 million homeowners were delinquent on their mortgage payments—the highest number seen since January 2015. Approximately 211,000 of the delinquent homeowners are in foreclosure.

Compounding the strain on the real estate market, U.S. sales of previously owned properties fell 17.8% In April, the largest decline since 2010 according to the National Association of Realtors.

The CARE Act

The CARE Act permits borrowers with federally backed mortgages to forbear on their payments for up to a year. Unfortunately for homeowners, the Act affords no protection for borrowers with mortgages that are not federally backed. These non-federal mortgages constitute nearly half of the total number of mortgages across the nation.  

Lenders were prohibited by The Care Act from initiating foreclosure proceedings on federally backed loans for at least 60 days following March 18. These government enforced moratoriums on foreclosure proceedings resulted in record lows for foreclosure starts and foreclosure sales, or completions, in the initial stages of the pandemic. Foreclosure starts had fallen over 80% from the preceding year, while foreclosure sales fell 93% over the same timeframe.

The spike in the mortgage delinquency exhibits the toll that COVID-19 is taking on borrowers across the country. As unemployment increases and household incomes decrease, even with many states reopening, there is a good chance that the surge in delinquencies continues.  Based on the current trends, unless further relief is forthcoming either via legislation or cooperation from mortgage lenders, it seems likely that foreclosure starts and sales will experience their own spike in the coming months.