Skipped mortgage payments across California are jumping to levels not seen since the mortgage mess surrounding the Great Recession.

Should we be very worried about a pandemic-burdened economy’s hit to bill-paying abilities?

Let’s start with a few numbers from mortgage tracker CoreLogic and its measure of “seriously delinquent” home loans in August — those with 90 days or more of late payments.

Statewide, 3.8% of home loans were in deep trouble compared with 0.6% a year earlier. Yes, that’s a six-fold-plus jump.

It’s largely the same story in this sample of key markets …

Riverside and San Bernardino counties: 4.6% “seriously” tardy vs. 1% a year earlier.

Los Angeles-Orange County: 4.2% vs. 0.6% a year earlier.

San Francisco metro: 2.8% vs. 0.3% a year earlier.

San Jose metro: 2.2% vs. 0.2% a year earlier.

This isn’t just California craziness. The nation’s rate was 4.3% — up from 1.3% in August 2019 and the highest rate of “serious” trouble since February 2014.

And to be fair, the current pace of skipped payments is nowhere near the double-digit levels seen in the last mortgage crisis. By CoreLogic’s count, Inland Empire delinquencies topped 16% and neared 10% in Los Angeles-Orange County. In the Bay Area, late payments approached 7%.

Still, a flock of homeowners who can’t satisfy their lenders is a worry for the housing market – and the broad economy.

You don’t need a trusty spreadsheet to know why homeowners are having trouble making payments. Business limitations designed to slow the spread of coronavirus have hammered employers who slashed payrolls; furloughed and reduced hours of employees; and lowered incentive pay.

But the federal government’s response to current house payment challenges is much smarter than the limited help offer during the last debacle.

This year’s loan forbearance programs are far more generous than the limited and hard to get help offered in the previous mortgage ugliness. Foreclosures have been largely stymied by various moratoriums.

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In many cases, today’s troubled borrowers can just put missed payments on the back end of the mortgage — penalty-free with no impact on their credit history.

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Besides, federal regulators made certain technical adjustments that kept the mortgage market flowing smoothly – keeping the entire housing market operating.

Plus, let’s not forget what the Federal Reserve has done. It lowered mortgage rates to historic lows. It did so, in part, by buying over $1 trillion of mortgages to support housing – a sum larger than the stimulus plan for the entire economy during the Great Recession.

Not to mention 2020’s borrower was in better shape financially than folks from that aforementioned bubble era. This cycle’s lenders were far stricter about who got a loan. Owners have far larger financial cushions with few “underwater” mortgages greater than a home’s value.

Also, the pandemic’s bailout for housing not only kept a key economic segment humming but it provides troubled borrowers another fix — selling in a market short of homes to buy with eager house hunters ready to deal.

Still, with all these …read more

Source:: Los Angeles Daily News


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