“Mortgage delinquencies have inched up over the past year,” said Marina Walsh, CMB, MBA's Vice President of Industry Analysis. “Even though there was a small, third-quarter decline in the overall delinquency rate compared to the previous quarter, this was driven by a decrease in 30-day delinquencies.
The overall arrears rate for residential mortgages appears to be plateauing, with some regions such as the South West recording a pronounced decline in the arrears rate. Alongside the encouraging arrears data, the number of new originations remains solid, with falling interest rates starting to have a modest impact.”
California has become a recent hotspot for rising mortgage rates and some residents are either face foreclosure or relocating to other states with lower housing prices. In related news, mortgage delinquencies were also up in October, indicating a downturn as the housing market shifts into 2025.
Mortgage delinquencies rose from 1.4% during Q3 2021 to 3.2% by Q1 2024. The pre-pandemic average mortgage delinquency rate was 3.5%.
Mortgage payments increasingly late
In the second quarter of 2024, delinquent and seriously delinquent mortgage accounts had nearly returned to pre-pandemic levels. Despite that, the portion of homeowners at real risk of losing their homes due to the inability to make payments remains historically low.
Delinquencies on auto loans have been creeping up since the economy began reopening after the pandemic, hitting 3.8% in June. That was the highest level since 2010, according to data from the Federal Reserve, which measures payments that are at least 30 days past due.
States that had the greatest number of REOs in October 2024, included: California (306 REOs); Illinois (252 REOs); Texas (249 REOs); New York (212 REOs); and Florida (140 REOs).
The Takeaway
Of all 50 states, California had the most foreclosure filings (3,975), and Vermont had the least (11). As for the states with the highest foreclosure rates, Illinois, Connecticut, and New Jersey took the top three spots, respectively.
Foreclosure Predictions 2025
Again, a wave of foreclosures isn't likely in 2025. Unlike during the mortgage crisis, most homeowners won't go underwater on their mortgages, even if home prices decline. The majority have equity in their homes because housing prices have progressively gone up over the past few years.
In September 2024, the U.S. delinquency and transition rates and their year-over-year changes were as follows: Early-Stage Delinquencies (30 to 59 days past due): 1.6%, up from 1.5% in September 2023.
Freddie Mac: In their December outlook, Freddie Mac researchers said they believe mortgage rates will go down "very gradually" in 2025. The Mortgage Bankers Association: The MBA sees mortgage rates trending down throughout 2025. The group thinks rates could end 2025 at 6.40% and tick down to 6.30% in 2026.
Other states with high rates of missed payments include Alabama and Arkansas. At the opposite end of the spectrum, the West Coast has the lowest share of mortgages more than 30 days delinquent, with Washington, Oregon, and California all reporting rates of delinquent mortgages under 1.5%.
For only the third time in 2024, the Federal Reserve has lowered the federal funds rate. On Dec. 18, the Fed cut the rate, which influences interest on everything from car loans to credit cards, by 25 basis points. That takes it from 4.50% to 4.75% to 4.25% to 4.50%, the lowest it's been since February 2023.
Mortgage debt is the heavyweight when it comes to household debt, dwarfing credit card balances, student loans and auto loans. Since 2013, mortgage debt has steadily risen. Since the pandemic, increases in home prices and interest rates kicked the climb into overdrive.
Despite Blackstone's hope for stabilization, a 117% rise in foreclosures since March 2023 signals distress. March 2024 hit a 9-year high, with CA, NY, and FL leading. While CRE faces uncertainty, single-family housing remains resilient, offering a silver lining.
The foreclosure rate reached its peak in 2010, just after the financial crisis of 2007-2009. Since then, the rate has steadily fallen.
Getting a foreclosure notice of default from your lender is not the end of the world. While it can feel stressful, this notice is just the start of the foreclosure process. As the borrower, you still have time and options to stop the foreclosure of your home.
Commercial real estate foreclosures are surging across the U.S., with foreclosures climbing 48% in September year-over-year. California's numbers are especially striking, with a massive 238% increase, per ATTOM's recent report, as detailed by Business Insider. This spike points to growing pressures in the sector.
More homes on the market in 2025 may create better opportunities for buyers. Higher inventory means fewer bidding wars, which may keep home prices more stable. Falling mortgage rates could also ease the cost of buying a home, though it may take time.
In the first quarter of 2024, roughly 2.68 percent of all consumer loans at commercial banks in the United States were delinquent. The delinquency rate on this type of credit decreased after the first quarter of 2020, when it reached 2.47 percent, but it has been rising again since 2021.
Increase in Credit Delinquencies
Late-stage mortgage delinquencies rose the most year-over-year by 0.05%, followed closely by credit card delinquencies, which increased by 0.04%. Credit delinquency rates increased across all VantageScore tiers, indicating broader challenges in managing timely payments.
Credit card defaults are on the rise for Americans, reaching the highest level in 14 years. Credit card defaults jumped to a record $46 billion from January through September 2024, according to the Financial Times.