The housing crisis that caused widespread foreclosures in the early 2010s is far behind us, and the risks of economic downfall because of a housing crash are gone…right? Well not so fast. Like dark skies and thunder that signal an oncoming storm, mortgage delinquencies are actually on the rise, no doubt in part because of the pandemic.
What are Delinquency Rates?
Looking at foreclosure cases and the number of filings, you would be led to believe that all is well in the housing market. But actually, there is another indicator of the health of the housing market — delinquency rates.
Delinquency rates are the rate that people are behind on their mortgage. The farther behind someone is on payment, the worse an indicator it is for the housing market because a mortgage that is, say, 90 days behind, is more likely to lead to a foreclosure case being filed than a mortgage that is 30 days delinquent.
Of course, because people can be behind on their mortgages by different amounts and time frames, there are differing statistics on the length of delinquencies. That is why most delinquency statistics break down delinquencies in groups of 30—30 days, 60 days, or 90 days late.
Delinquency Rate are on the Rise
According to one report, the delinquency rate rose from July to October 2020 by about 3%, a substantial number.
As of July 2020 the rate of early delinquencies—that is, people behind 30 days on their mortgage—went down, which would be good news. The problem is that more people were in long term delinquency—being 90 or more days late on mortgage payments.
The delinquency rate for these long-term delinquencies is at about 4%, and if that sounds low, consider that it is the highest delinquency rate since 2014. While it is easy to blame these delinquencies on the pandemic, consider that in July 2020—just a few months after the pandemic shutdowns began—the 120-day delinquency rate was at its highest level in 20 years,
New Jersey was one of the states with the highest delinquency rates in the entire nation.
The reason why those delinquencies have not translated into foreclosure filings and calamitous foreclosure sales, is likely because of foreclosure moratoriums put on by various state governors, most of which are ending or have recently ended.
That means you can expect a rise in foreclosure filings again, unless the banks have changed their ways, and are more willing to work with homeowners that are in distress.
Foreclosures Affect Everyone
Remember that foreclosures do not just affect the person being foreclosed on—they affect all homeowners in the local community by dropping property values for everyone. Those lowered property values in turn lead to people wanting to sell their homes for lowered prices, which again lowers everyone’s value.
If you are buying or selling a home, make sure you understand the document that you are signing, to avoid problems later on. Contact our real estate attorneys at The Law Office of Agnes Rybar LLC to help you with any kind of transaction involving your property.