The State of Mortgage Delinquencies

The State of Mortgage Delinquencies


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When we look at the state of mortgage delinquencies, we see some improvement in the short term or recent defaults. However, mortgage delinquencies continued to rise in July, according to CoreLogic’s new loan performance report. The company found that 6.6 percent of all mortgages were at least 30 days past due (including those in foreclosure.) This represents a 2.8-percentage point increase in the overall delinquency rate compared to July 2019 at 3.8 percent. However, it was a lower rate than the 7.1 percent reported for June, at that point, a 3.1-point annual increase.

Overall, serious delinquency improvements offset loans at least 90 days past due, including loans in foreclosure. That category surged from 1.3 percent in July 2019 to 4.1 percent. It is the highest serious delinquency rate since April 2014.

Further, the 120-day seriously delinquent bucket was the highest in the 21 years CoreLogic has been tracking the data. The company said the job market’s persistent instability pushed many homeowners further down the delinquency funnel this summer.

The State of Mortgage Delinquencies

The foreclosure inventory, loans in some stage of the foreclosure process, is the lowest for any month in at least 21 years at 0.3 percent, down from 0.4 percent in July 2019. Most foreclosures actions are on hold due to the CARES Act. What happens when the CARES Act expires?

As measured by CoreLogic’s Home Price Index (HPI), home prices have been rising at an accelerated rate. Still, unemployment levels in hard-hit areas remain stubbornly high, leaving some borrowers house-rich but cash poor. With persistent job market and income instability, Americans continue to tap into savings to stay current on their home loans. But as savings run out, you could see borrowers pushed further down the road to foreclosure.

Boston Federal Reserve President Eric Rosengren put a damper on any enthusiasm when he said, “I expect a wave of defaults and bankruptcies to hit that will aggravate an unemployment problem that has hit lower-wage workers disproportionately.

Now Is the Time to Get Ready

The opportunity awaits the note investor. As we wrote in Due Diligence Steps in Notes Investing, do your initial due diligence. You want to perform a high-level review of the notes that will soon become available. You want to focus on only the best notes and underlying collateral.

Necessary steps of initial due diligence include:

  • First, strip out any of the states you want to exclude.
  • Second, filter out any of the cities that don’t pass your criteria (e.g., low population, high vacancy rate, negative growth rate).
  • Third, strip out any of the properties that do not meet your minimum criteria (e.g., built before 1950, less than three beds).
  • Fourth, strip out any notes that don’t meet your overall strategy (e.g., payment history, UPB).
  • Fifth, perform any additional due diligence steps based on your comfort level.

Paige Panzarello, the “Cashflow Chick,” Founder of The Tryllion Group, Investor/Entrepreneur having done $150 Million+ in real estate transactions; Specializing in Non-Performing Notes. She has been a regularly featured guest on “The Cashflow Guys” podcast, and you can also find her on many other Real Estate and Entrepreneurial podcasts and in the Wall Street Journal as well.  She also speaks at various Real Estate Investing clubs and conferences across the country. Paige teaches the “Building Wealth with Notes” Workshop that drills down into the details of how to successfully buy Non-Performing Notes, create passive income, and mitigate risk. www.CashflowChick.com/training

Surviving the crash of 2007, Paige knows how “life happens” every day. Her passion is to help people build wealth, secure their financial future, enjoy life, and be ready-not broken! Whether it is improving communities one house at a time, assisting borrowers in staying in their homes, or working with other investors to learn a new way to earn higher investment dollars for their retirement years, Paige potentially dedicates herself and her business helping people improve their lives in every way.  For more information got to www.CashflowChick.com

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