Mortgage Delinquencies Are on the Rise According to Banks

In the first quarter of 2022, mortgage delinquencies went up, according to an Office of the Comptroller of Currency (OCC) survey of several banks.

The OCC said in early July that seven banks reported 19,542 new foreclosures were initiated in Q1 2022, which is comparable to the pre-COVID-19 pandemic foreclosure volume of 19,815 (Q1 2020). The first-quarter number compares to 1,294 new foreclosures in the preceding quarter and 833 in the first three months of 2021. 

What does it mean for the housing market in general, and how will it impact real estate investors?

Will There Be a Wave of Mortgage Delinquencies in 2022?

By definition, mortgage delinquencies are simply home loans that have not been paid by borrowers for a certain period. Mortgages become delinquent when borrowers fail to make one or more payments as agreed upon in a loan contract. The more months you miss, the worse the situation gets. Missing payments can lead to foreclosure. 

Mortgage delinquencies are indeed on the rise, according to the OCC. Based on the increase in foreclosure initiations in the first quarter of 2022, the OCC report confirmed what industry observers have predicted will happen at the end of the foreclosure moratorium. The pandemic foreclosure volume has been going up significantly since the end of the foreclosure moratorium on July 31, 2021. 

The OCC survey also found that home forfeiture actions went up year-over-year by 26.8% to 2,410. The number includes completed foreclosure sales, deed-in-lieu-of-foreclosure actions, and short sales. 

However, the same report also states that the number of modifications in Q1 2022 went down from the previous quarter. The total number of modifications completed decreased by 10.7% to 42,427. These modifications were carried out to help lower borrowers’ mortgages and make it easier for them to pay regularly. 

Despite the modifications, the pandemic foreclosure volume still added to its total. March 2022 ended with 2,915 loans that were way past due or in the process of foreclosure.

The same banks also reported that they serviced around 12.2 million first-lien residential mortgages. Collectively, the mortgages’ unpaid principal balance amounted to $2.6 trillion. That number represents 22.0% of the nation’s outstanding residential mortgage debt.  

Related: Why & How to Invest in Foreclosures Near Me

Where Do We Go From Here?

Based on the numbers, one should be very concerned with what’s going on, especially with the numbers going above the pre-COVID-19 pandemic foreclosure volumes. MarketWatch reports, however, that while it may seem alarming at this time, it is not exactly as it seems. At least not, according to the pros. 

Lending Tree’s senior economic analyst, Jacob Channel, explains that while the number of mortgage delinquencies has been rising, it is not painting a complete picture of the 2022 US housing market. Although serious mortgage delinquencies increased from where they were a few years ago, they were also low even before COVID-19. 

Black Knight, a mortgage technology and data provider, reports that the number of serious mortgage delinquencies has gone down between 6.0% and 12.0% each month in the past 14 months. 

To have a better understanding of what’s going on, consider this: the delinquency rate for FHA loans is five times higher than that of conventional loans. Those who have FHA loans are mostly folks with low-to-moderate income. They are the ones that the pandemic has greatly affected compared to conventional loan borrowers. 

What’s more, Black Knight also reveals that the national delinquency rate (this includes those who missed a month’s payment) went down in April 2022 to 2.8%. Yes, the number of borrowers who have one-payment delinquencies went up to 7.9% in the same month. But it is offset by the 8.0% decrease in the number of those who missed three or more payments. Additionally, the pandemic foreclosure volume (meaning foreclosures that got started) went down to 12.0% in April from the previous month.

So while mortgage delinquencies have gone up, we are not on the verge of a housing market crash or collapse. 

Related: When Will the Housing Market Crash Again in the US?

Is This an Opportunity for Real Estate Investors or a Red Flag?

So what does this all mean for real estate investors? Despite what the reports say about mortgage delinquencies going up, the housing market is still in pretty good shape.

Channel says:

The overall mortgage delinquency rate fell to a new record low, and not only that, [foreclosure starts] actually fell 12% from February to March, the largest month-over-month decline in 20 years.

Foreclosure starts are still below pre-COVID-19 pandemic foreclosure numbers. It simply means that even if the number of delinquencies increased, not all of them are actively being foreclosed on. 

This is one reason why real estate experts and industry insiders believe that the market is still doing well. Most people who have taken loans to buy investment properties are able to fulfill their obligations despite the trying times. 

While higher mortgage rates and property prices plus an increase in housing demand might keep some prospective investors away, it is very unlikely that we will see foreclosures happen left and right. 

What Investors Should Do About It

At the end of the day, it will really depend on your financial situation. The goal of getting into real estate investing is to build wealth and diversify your portfolio. If you have the means to buy income properties for sale and have a good investment strategy in mind, by all means, go for it.

However, if you think you’re biting off more than you can chew because of certain financial challenges, there are other ways you can invest in real estate without money. Don’t put yourself in situations that you will later regret. 

To increase your chances of success in real estate investing, you need to know what the numbers will look like before you decide. This is where a real estate website like Mashvisor comes in handy.

Mashvisor will give you access to a massive database that covers almost every real estate market in the US. Its database is regularly updated so investors can get highly accurate real estate market analysis results. Having a deeper insight into a local real estate market will give you greater confidence in coming up with the right investment decision. 

To learn more about how Mashvisor can help you find profitable investment properties, schedule a demo now.

Wrapping It Up

It may seem quite alarming to hear about mortgage delinquencies on the rise, but having a better understanding of the overall housing market will put your mind at ease. It’s great to be up-to-date with the latest news, but you should also arm yourself with a deeper knowledge of the whole market. This will help you avoid making any irrational decisions. 

Understanding market conditions is what real estate investing is all about. You don’t decide to invest on a whim or based on hearsay. You need to verify the actual numbers for yourself. With the help of Mashvisor, this is now a lot easier and faster to do. What used to take several months of market research and analysis only takes minutes today.

Performing due diligence is a lot more convenient with Mashvisor’s help. You can now search for properties, get better insight into your market of choice, and analyze data more accurately with Mashvisor. Ultimately, it will help you make more informed investment decisions. 

To start using Mashvisor’s real estate investment tools, sign up for a 7-day free trial today, followed by 15% off for life.