Homeowners are struggling to afford their mortgages, and the problem is only getting worse, according to new data from Freddie Mac. Single-family serious delinquencies surged in September, while multi-family serious delinquencies also saw an uptick for mortgages.
Delinquent mortgages are also on the rise. Although many homeowners who bought or refinanced before 2022 were able to lock in low rates, as of Q2 2024, the share of mortgages over 30 days delinquent has risen to 3.35%.
Since lows recorded in 2021, the number of homeowners falling behind on mortgage payments has risen, as evidenced by the increasing percentage of overall balances that are delinquent each year in data tracked by the Federal Reserve Bank of New York.
WASHINGTON, D.C. (November 7, 2024) — The delinquency rate for mortgage loans on one-to-four-unit residential properties decreased slightly to a seasonally adjusted rate of 3.92 percent of all loans outstanding at the end of the third quarter of 2024 compared to one year ago, according to the Mortgage Bankers ...
(NewsNation) — Mortgages make up the bulk of household debt but a new analysis shows most Americans owe thousands of dollars beyond their home loans, with members of Gen X carrying the highest balances.
Third-quarter data from the Mortgage Bankers Association (MBA) showed a 30-day delinquency rate of 3.92% for one- to four-unit residential loans, up from 3.62% in Q3 2023 and 3.37% in Q2 2023 — which was the lowest level since 1979.
Since then, with vaccines allowing people to work more safely and minimizing further disruption to business operations, the percentage of mortgage holders behind on payments has declined to about 7%—an improved figure, but one that still represents more than 6 million American households.
Key Takeaways
In general, a lender won't begin foreclosure until you've missed four consecutive mortgage payments. Timing can vary from lender to lender, as well as the state of the housing market at the time. Lenders generally prefer to avoid foreclosure because it is costly and time-consuming.
When a homeowner cannot keep up with mortgage payments, the lender may foreclose on the home. Since foreclosures can have devastating consequences for families, it is important that homeowners struggling to make their mortgage payments work with their servicer to find a solution.
Similarly, states along the Pacific Coast—where home values skyrocketed during the pandemic—have some of the lowest rates of free-and-clear homeownership among the working-age population. California (22.7%), Washington (22.8%), and Oregon (22.9%) sit at 45th, 44th, and 43rd out of all 50 states, respectively.
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.
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.
That makes sense, of course, as older Americans have had a longer time to make payments. But with nearly two-thirds of retirement-age Americans having paid off their mortgages, it means that the average age they have gotten rid of that debt is likely in their early 60s.
Many Americans are still in a tough spot: Nearly 30% of all US households this year said they spend more than 95% of their disposable income on necessities such as housing costs, groceries and utility bills, according to a Bank of America Institute report, up from 2019 levels.
NAHB has updated its housing affordability graph for 2024, and the latest data show that 66.6 million households, 49% out of a total of 134.9 million, are unable to afford a $250,000 home.
Key takeaways. If you miss one mortgage payment, lenders will often issue you a 15-day grace period to pay without incurring a penalty. If you miss four consecutive mortgage payments (or are 120 days late), most lenders begin the process of foreclosure on your home.
Negative Impact on Credit Score
For example, a single missed payment can lower your score by as much as 100 points or more, if your credit history is already less-than-stellar. Late mortgage payments can linger on your credit report for up to seven years, potentially years after you've already caught up.
Which state has the longest foreclosure process? The state with the longest foreclosure process is Hawaii, followed by Louisiana, Kentucky, Nevada, and Connecticut.
For mortgages, while there has been a moderate rise in mortgage delinquencies, they remain below pre-pandemic levels. 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%.
The survey found that 63% of Americans can't afford to buy a home this year, with 87% of Gen Z unable to and 62% of millennials unable to.
Delinquency Rate: As of September 30, 2024, FHA's serious delinquency rate – those mortgages where the borrower is 90 or more days behind on their mortgage payment – remained consistent with pre-pandemic levels at 4.15 percent.
Foreclosures are rising, but it's not yet alarming. The real estate market is experiencing a slight rise in foreclosure activity following an extended period of moratoria that paused any foreclosures during the pandemic.
Fannie Mae: Fannie Mae's latest forecast predicts that 30-year mortgage rates will drop to 6.20% by the end of the year. Its forecast for 2026 has rates falling to 6.10%. Freddie Mac: In their December outlook, Freddie Mac researchers said they believe mortgage rates will go down "very gradually" in 2025.