It’s been 10 years since the housing bust put millions of homes into foreclosure, and after years of steadily declining foreclosure rates, the percentage of mortgages that are in the foreclosure process has fallen to levels not seen since before the crash.
According to new data from CoreLogic, just 0.6 percent of mortgages were in some stage of the foreclosure process in March 2018, a level that’s held steady since August 2017 and is the lowest rate since June 2007. Some of the mortgages in the foreclosure process today were signed prior to the housing bust, when lending practices were much more relaxed.
Mortgages in earlier stages of delinquency are also down. The percentage of mortgages that are 30 to 59 days past due was 1.7 percent in March. Mortgages 60 to 89 days past due was 0.6 percent. Mortgages that are considered in “serious delinquency”—which is defined as being 90 days or more past due or in some stage of the foreclosure process—was at 1.9 percent.
“They’re almost back to the long-term normal percentages, but not fully back,” said Frank Nothaft, chief economist of CoreLogic. “We’re still a little bit elevated relative to what they had been 15 years ago or longer. I do think over the course of the next 12 to 18 months, we’ll continue to see foreclosure rates and serious delinquency rates drift lower. We’ll probably be back to what that normal level was.”
Looking at mortgage delinquency and foreclosure rates can be informative for the overall health of the housing market. In the fall of 2007, all stages of delinquency and foreclosure rates started to rise. A year later, foreclosure rates and serious delinquency rates exploded, as serious delinquency peaked at more than 7 percent in 2010. Foreclosure rates reached 3.57 percent.
Serious delinquencies and foreclosure rates rose more dramatically than the rates for mortgages 30 to 59 days over due and 60 to 89 days over due because mortgages in the latter categories ultimately transition out by graduating to the next highest level. But serious delinquency is 90 days over due or more; there’s no higher level except foreclosure, and homes in the foreclosure process are included in the serious delinquency category.
Since the crisis, mortgage lending practices have gotten more strict, leading to healthier overall mortgage performance, as evident by the steadily improving delinquency rates. Nothaft believes the percentage of mortgages that transition from 30 days over due to 60 days over due is a leading indicator of where the market is headed. Some people miss a payment on their mortgage because of an extenuating circumstance and are able to get caught back up before they reach 60 days over due.
If the mortgages start transitioning to 60 days over due at a higher rate, it could be a sign of trouble brewing in the housing market. The transition rate from 30 to 60 days over in March 2018 was 11.6 percent, matching what it was the year prior, which is the lowest CoreLogic has recorded for a month of March since 2000. During the financial collapse, the transition rate from 30 days past due to 60 days past due reached a peak of 31 percent in November 2008.
Coupling the low foreclosure and delinquency rates with low transition rates, it looks like the mortgage market will remain steady, at least in the near term.