Increased Delinquency Not a Sign of Distress - Hurricanes to Blame

Loans performed well in September, continuing to erase most of the last vestiges of the market's Great Recession distress.  The CoreLogic Performance Insights Report for the month says the national delinquency rate is now 5.0 percent. This ties September with August as the lowest rate since 2007. With the rate so low, measures of improvement are becoming slim. The September rate represents only an 0.2 percent year-over-year decline.

Early-stage delinquencies, loans that are 30 to 59 days past due, rose 0.3 percent from a year earlier to 2.4 percent. CoreLogic's chief economist Frank Nothaft said this increase, the largest since June 2009, was not an indication of any deterioration in credit but reflected the impact of the late summer hurricanes on Texas, Florida, and Puerto Rico. "September's early-stage delinquency transition rate rose to 2.6 percent in Texas and it rose to 3.2 percent in Florida, which is higher than the 1 percent that's typical for both states. Texas and Florida's early-stage delinquency transition rates in September are much lower than New Orleans in September 2005 when the transition rate reached 17.4 percent as a result of Hurricane Katrina."

The share of mortgages that were 60-89 days past due in September was 0.7 percent, unchanged from September 2016, while the serious delinquency rate, loans over 90 days late, declined from 2.3 percent to 1.9 percent year-over-year. The serious delinquency rate has been 1.9 percent since June of this year and are the lowest rates since October 2007 when it was also 1.9 percent.  

As of September 2017, the foreclosure inventory rate, which measures the share of mortgages in an active stage of foreclosure, was 0.6 percent, down from 0.8 percent in September 2016.  This was unchanged from August giving those two months the lowest foreclosure inventory rate since June 2007 when it was also 0.6 percent.  The September inventory was the lowest for any September since 2006.

CoreLogic also analyzes transition rates, which indicate the percentage of mortgages moving from one stage of delinquency to the next. The share of mortgages that transitioned from current to 30 days past due was 1.3 percent in September 2017, up from 0.9 percent in September 2016. The September rate was the highest for any month since November 2014 when it was 1.4 percent.  This could be partially due to the transition rates in the two hurricane impacted states announced by Nothaft.  By comparison, in January 2007, just before the start of the financial crisis, the current-to-30-day transition rate was 1.2 percent and it peaked in November 2008 at 2 percent.

The state with the highest delinquency rate remains Louisiana, at 8.2 percent. This is, however, an improvement year-over-year of 0.9 point. Trailing distantly is New York with a 7.1 percent rate, down from 7.9 percent, and New Jersey at 7.0. That rate dropped from 8.4 percent a year earlier.

"While natural hazard risk was elevated in 2017, the economic fundamentals that drive mortgage credit performance are the best in two decades," said Frank Martell, president and CEO of CoreLogic. "The combination of strong job growth, low unemployment rates, steady economic performance and prudent underwriting has led to continued improvement in mortgage performance heading into next year."