Despite economic volatility, most people can still pay their mortgages
The latest CoreLogic report shows delinquencies at record low levels, although there are some warning signs.
As the Federal Reserve works to bring down inflation by slowing the economy, there is always the risk of an overcorrection. In that "hard landing" scenario, the country could experience a more severe recession, leading to job losses — and a subsequent rise in the number of people who can't make house payments.
Currently, the U.S. mortgage delinquency rate is low. But the latest data from CoreLogic showed that while the delinquency rate was flat year-over-year in September, it was the first time in more than two years that the rate did not decline.
And in news from the Department of Veteran's Affairs, the VA is proactively working to reduce potential foreclosures on VA loans.
The numbers: CoreLogic's Loan Performance Insights report for September found that mortgage delinquencies remained near record lows. The foreclosure rate was 0.3%, while 2.8% of all mortgages were in some stage of delinquency.
The delinquency rate of 2.8% is unchanged from September 2022 and is similar to levels seen over the past 18 months, according to the report. For context, delinquency rates for home loans rose above 10% during the Great Recession in 2008.
Where the delinquency rate goes next will depend on what happens to the labor market, said Molly Boesel, principal economist for CoreLogic. If the unemployment rate rises, Boesel expects delinquencies will as well.
Warning signs: While the number of serious delinquency notices (more than 90 days late) has gone down, early-stage filings rose from 1.2% to 1.5% in the past year.
States with the highest delinquency rates in September were Louisiana (5.3%), Mississippi (5.3%) and New York (3.9%).
Help for veterans: The Department of Veterans Affairs recently announced that it is calling on mortgage services to pause foreclosures of VA-guaranteed loans through the end of May, and it is extending the COVID-19 Refund Modification program for the same period.
Along with these steps, the department is launching a new home retention program called the VA Servicing Purchase program (VASP). Through the program, the VA will purchase defaulted VA loans from mortgage servicers, modify the loans and place them in a VA-owned portfolio.
"Coupled with the usual unofficial 'holiday moratorium' that Fannie Mae, Freddie Mac and the FHA put in place between Thanksgiving and New Year's Day, foreclosure activity is likely to be incredibly slow for the next month or so," said Rick Sharga, founder of CJ Patrick Company, in a LinkedIn post following the VA's announcement.