Mortgage defaults decline in the third quarter, but Florida is an outlier

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The third quarter of 2020 brought good news and bad news when it came to who could afford to pay their mortgages on time as the coronavirus pandemic continued to hold the United States in place.

Overall, the national mortgage default rate fell slightly more than half a percentage point from the second quarter to 7.65 percent of all outstanding loans, or around 2.98 million mortgages, according to new figures released Tuesday by the Mortgage Bankers Association. The association arrived at these figures by collecting around 39 million loans for one to four-story residential properties.

The mortgage default rate was around 3.68 percentage points higher than in the third quarter of 2019.

“In line with the improving labor market and general economic recovery, homeowners’ ability to make mortgage payments improved in the third quarter,” said Marina Walsh, vice president of industry analysis for the association.

Pressure points continue to emerge. While the overdue percentage of loans defaulted in the last 30 or 60 days fell, the 90-day default rate rose to its highest level since the second quarter of 2010.

The association’s survey classifies a loan as defaulting even if the borrower has a deferral agreement with their bank to avoid the risk of foreclosure. “Said Walsh.

Additionally, homeowners on Federal Housing Administration loans for first-time buyers or lower-income buyers, as well as Veterans Administration loans, are still showing that they are more affected by the coronavirus pandemic than those on traditional loans. The Veterans Administration loan default rate rose to 8.16 percent in the third quarter, while the Federal Housing Administration default rate decreased slightly but remained high at 15.59 percent.

The rate on Federal Housing Administration loans classified as “seriously past due” – at least 90 days past due or in foreclosure – reached its highest rate since at least 1979.

Florida continues to rank high for its default rate, with the fourth largest increase over the same period last year: 5.02 percentage points to 15.19 percent of past due loans. Nevada came in first, followed by New Jersey and Hawaii. However, Florida also saw one of the largest declines in overdue mortgages compared to Q2 2020, meaning it did goes in a positive direction.

The fact that both Nevada and Hawaii were included at the top led Richard Buttimer, Dean of the University of North Florida’s Coggin College of Business, to suggest a loss of tourism as the culprit for the Floridians’ troubles.

“A lot of Florida homes are rental, and with the pandemic drop in tourists, I think some of these people are stressed out,” he said.

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