‘Bumpy waters ahead’: New mortgage data suggests wave of foreclosures ahead
If you are a house flipper or owner looking for a new investment, then watch the start of next year. Two reports released this week signal a new wave of seizures – likely in the first half of 2021, once homeowners exhaust their mortgage forbearance options CARES Law. These relief options allow borrowers to suspend their loans for a total of 360 days (two separate 180-day terms) that began in March 2020.
The foreclosure moratoria will also expire in December, allowing more lenders to take action against delinquent borrowers in the new year.
And the number of these delinquent borrowers? They are reaching record highs. Let’s take a look at the new data released this week – and how it will impact investor options by 2021.
The proof is in the numbers
According to at CoreLogic (NYSE: CLGX), the 150-day delay rate has just reached its highest level in two decades. What about the share of all loans currently at a certain stage of delinquency? It is now at 6.6% – up 2.9 percentage points from the period last year.
Here is how the totals were broken down by stage of delinquency:
- 30 to 59 days late: 1.6% of all mortgages
- 60 to 89 days late: 0.8%
- 90+ days late: 4.3%
- 150+ days late: 1.2%
Foreclosure rates are actually quite low (thanks to the abstention options mentioned above), but since many of these homeowners face loss of income or employment, those who mortgage payments could pose a serious financial threat to many.
As Frank Martell, President and CEO of CoreLogic, says: “Forbearance programs continue to reduce the flow of homes to foreclosure and distressed sales and have been key to helping many families who have been particularly hard hit by the pandemic. Even though foreclosure rates are at an all-time low, the 150-day spike in overdue loans portends rough waters ahead. “
Where these seizures can strike
Another report, this time by ATTOM data solutions, indicates where these foreclosure waves could be coming from. Louisiana, New York, New Jersey, Mississippi and Florida currently have the highest shares of delinquent loans statewide, according to figures released this week.
At the metro level, here are the markets you should keep an eye out for after blackout periods end:
- Miami (12% of all loans)
- New York (11%)
- Las Vegas (10%)
- Houston (10%)
- Chicago (8%)
The bottom line? Seizures are currently rare, but data points to an increase in these distressed properties arrive early in 2021. If you are looking for your next building for rent or repair, keep an eye on the numbers (especially those at market level) and be ready to act quickly once. abstention periods begin to end. With inventory issues plaguing most markets, you can bet there will be stiff competition when these properties become available.