The mortgage delinquency rate measures the share of home loans with missed payments of 30 days or more. It serves as an important economic indicator that reflects the stability of the housing market and the financial health of homeowners across the U.S.
How Is the Mortgage Delinquency Rate Calculated?
This rate is calculated by dividing the number of delinquent mortgages by the total number of mortgages within a specified portfolio or market, then multiplying by 100 to get a percentage:
(Number of Delinquent Mortgages / Total Mortgages) x 100 = Mortgage Delinquency Rate (%)
For example, if out of 1,000 mortgages, 20 are delinquent, the delinquency rate would be 2%.
Stages of Mortgage Delinquency
Delinquency is typically categorized by how late the payments are:
- 30-59 days: One missed payment.
- 60-89 days: Two missed payments.
- 90+ days: Three or more missed payments, often triggering foreclosure processes. This stage is known as serious delinquency.
Why the Mortgage Delinquency Rate Matters
- For Homeowners: A rising delinquency rate may indicate economic strain, potentially leading to job losses or financial hardship. Falling behind on mortgage payments can result in late fees, a lower credit score, and increased risk of foreclosure (foreclosure).
- For Lenders: Higher delinquency rates increase risk and potential losses, causing lenders to tighten credit requirements.
- For the Economy: Mortgage delinquencies can signal economic downturns. For instance, during the 2008 financial crisis, serious delinquencies surged above 11%, contributing to a recession.
Common Causes of Mortgage Delinquency
Unexpected life events often lead to delinquency, such as job loss, medical emergencies, divorce, death of a spouse, costly home repairs, or rising adjustable mortgage rates.
Managing Mortgage Delinquency
Homeowners facing payment difficulties should communicate promptly with lenders to explore options like hardship programs, forbearance agreements, or loan modifications (financial hardship, forbearance agreement). Early action improves chances of avoiding foreclosure.
Summary
The mortgage delinquency rate is more than a statistic; it’s a snapshot of financial health for many American homeowners. Understanding this rate helps you grasp broader economic trends and take proactive steps if you encounter payment challenges.