Mortgage delinquencies rise more than 8% to 9-year high as coronavirus pandemic hits corner of housing market

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• Mortgage delinquencies rose seasonally adjusted 8.22% in the second quarter to a nine-year high, according to a report released Monday by the Mortgage Bankers Association.
• The nearly 4% jump from the previous quarter was the largest in survey history, according to the report.
• In addition, the default rate of FHA mortgages, reserved for first-time buyers, has reached an all-time high.
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Some homeowners are struggling to pay their mortgages amid the coronavirus pandemic as the ensuing recession continues to hit the job market, according to a report released Monday by the Mortgage Bankers Association.

Global mortgage delinquencies rose 8.22% seasonally adjusted in the second quarter, according to the MBA. That marked a nine-year high and an increase of almost 4% from the previous quarter, the biggest quarterly jump in survey history.

“The effects of the COVID-19 pandemic on the ability of some homeowners to make their mortgage payments could not be more apparent,” Marina Walsh, MBA vice president of industry analysis, said in a statement .

Some homeowners have been hit harder than others, according to the report. The default rate on FHA mortgages – which are reserved for first-time buyers and used by many minorities and low-income Americans – climbed to nearly 16% in the second quarter, a record high.

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Currently, most homeowners struggling to pay off their mortgage are protected from foreclosure by the federal forbearance program, which allows them to defer payments for one year without penalty due to the coronavirus pandemic. In early August, President Donald Trump signed an executive order to extend federal moratoria on evictions and seizures amid the pandemic.

Mortgage delinquencies typically closely follow job availability, according to Monday’s report. Although the labor market has improved since the record loss of jobs in April, the pace of the recovery has slowed. In July, the unemployment rate was still high at 10.2%, and the United States needs to recover around 13 million jobs to reach pre-pandemic levels.

The states with the largest increases in mortgage default rates were New Jersey, Nevada, New York, Florida and Hawaii, all of the states with large numbers of jobs in the leisure and hospitality industry, the hardest hit by the pandemic, according to the MBA.

“Some homeowners, especially those with FHA loans, will continue to be affected by this crisis and delinquencies will likely remain at high levels for the foreseeable future,” Walsh said.