According to CoreLogic, the south Florida area is about to explode with foreclosures. Unemployment related to Covid-19 is the root cause and will likely not improve. A loan modification might help some of these homeowners to save her home. Home loans that are in serious delinquency — those that are 90 days or more past due or in foreclosure — could double by 2022 from levels seen this June, “barring additional government programs and support,” according to a CoreLogic report.
The firm’s most recent Loan Performance Insights Report noted that nationally, 7.1% of all mortgages were in some state of delinquency as of June. That’s up 3.1 percentage points from June of 2019.
However, homes in some stage of the foreclosure processwere down slightly to 0.3%, from 0.4% in June 2019. That’s mostly due to the fact that homes in early-stage delinquency (30 to 59 days overdue) dipped to 1.8% from 2.1% a year ago. The adverse delinquency rate (60 to 89 days overdue) was up to 1.8% from 0.6%.
The transition rate, or those homes moving into the first stage of delinquency (more than 30 days past due) was also down slightly to 1%, from 1.1% a year ago. That rate has slowed from its April 2020 peak of 3.4%, due to improvements in the labor market.
The report noted that if the situation isn’t addressed, millions of families could lose their homes through short sale or foreclosure. This could also hurt home prices as distressed sales become more commonplace in the market, the report noted.
“Sustained unemployment has pushed many homeowners further down the delinquency funnel, culminating in the five-year high in the U.S. serious delinquency rate this June,” the report noted. “With unemployment projected to remain elevated through the remainder of 2020, we may see further impact on late-stage delinquencies and, eventually, foreclosure.”
CoreLogic noted that home-purchase demand has paradoxically strengthened over the summer, while mortgage loan performance has weakened since the beginning of the pandemic.
“Forbearance has been an important tool to help many homeowners through financial stress due to the pandemic,” CoreLogic president and CEO Frank Martell said. “While federal and state governments work toward additional economic support, we expect serious delinquencies will continue to rise — particularly among lower-income households, small business owners and employees within sectors like tourism that have been hard hit by the pandemic.”
The firm noted that every state experienced annual increases in both overall and serious delinquency rates in June.
Florida was singled out in the report as a COVID-19 hotspot with a serious delinquency rate increase of 3 percentage points from the year prior. “Miami — which has been hard hit by the collapse of the tourism market — experienced the largest annual increase at 5.1 percentage points,” the report noted.
CoreLogic reported that homes in Miami-Fort Lauderdale-West Palm Beach had a 13.4% delinquency rate of 30 days or more in June, more than double the rate of 5.3% from a year ago. The area had a serious delinquency rate of 7.1%, more than triple the 2% rate a year ago. The foreclosure rate dropped, however, to 0.6% in June from 0.9% during the same time a year ago.