Homeowner delinquency rates are on the rise from record low levels but have not yet returned to pre-COVID-19 levels. There has been a lot of discussion on social media over the weekend regarding homeowner delinquency data, prompting me to address this topic and provide some clarity. The narrative being circulated is not accurate, and it is essential to examine the data closely before drawing conclusions.
The initial discussion stemmed from a social media post featuring a chart showing Freddie Mac’s Serious Delinquency levels on multifamily loans. It is crucial to note that these loans are related to multifamily mortgages used for commercial properties with five or more units, such as apartment buildings. The current rate of multifamily delinquencies is below 1%, although it is higher than during the 2008 recession. However, there is a significant distinction between apartment lending and homeowners with a 30-year fixed-rate mortgage.
While some individuals are suggesting significant stress in homeowner data, it is evident from the data that these are multifamily loans, as indicated in the chart below:
For data on homeowners and their delinquency rates, the most recent information from ICE shows that we have not yet returned to pre-COVID-19 levels. According to their First Look report on March 21:
- The national delinquency rate increased by 5 basis points to 3.53% in February, up by 19 bps from a year ago but still 32 bps below pre-pandemic levels.
- FHA mortgages contributed to 90% of the 131K year-over-year rise in delinquencies, despite accounting for less than 15% of all active mortgages.
- 4,100 homeowners in Los Angeles are now past due due to wildfires, up from 700 in January, with daily performance data suggesting this number could increase in March.
It is important to clarify misconceptions and emphasize the importance of thorough reading. The chart that initiated the confusion specifically refers to multifamily data. Furthermore, total credit stress data for loans categorized as severe derogatory has not yet rebounded to pre-COVID-19 levels.
Additionally, foreclosure and bankruptcy data have not returned to pre-COVID-19 levels yet, as shown in the chart below:
If you have any questions or need further clarification on the data, feel free to reach out to me on social media or at [email protected]. Your inquiries are valuable, and I am here to assist.
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