What Are 60-Plus Delinquencies?
The 60-plus delinquency rate is a key metric in the housing industry used to measure the number of mortgage loans more than 60 days past due on their monthly payments. This rate is often expressed as a percentage of a group of loans underwritten within a specific time frame, such as one year.
Key Points to Remember
- The 60-plus delinquency rate quantifies the number of mortgage loans over 60 days overdue.
- Typically presented as a percentage of loans underwritten within a certain period, such as annually.
- It’s a critical indicator for lenders to identify borrowers who might default on their loans.
Unpacking the Concept of 60-Plus Delinquencies
The 60-plus delinquency rate isn’t limited to mortgage loans alone; it can be applied to auto loans and credit cards as well. This metric helps creditors and lenders track whether consumers are falling behind on their payments and might default on their loans.
Types of Loans and Delinquencies
The 60-plus rate might be divided between prime loans and subprime loans, the latter carrying a higher delinquency rate due to borrowers’ poor credit histories. Rates may also be published separately for fixed-rate loans and adjustable-rate loans, the latter of which have variable rates that may reset to a fixed rate.
Economic Insights from Delinquency Rates
Monitoring 60-day and other delinquency rates offers valuable insights into the financial health of consumers and the broader economy. Favorable economic conditions typically result in falling delinquency rates, whereas deteriorating conditions and rising unemployment lead to higher delinquency rates.
Banks and mortgage lenders closely watch these rates because lapses in mortgage payments reduce their revenue. Persistently high delinquency rates can exacerbate poor economic conditions, making recovery challenging.
Comparing 60-Plus Delinquencies and Foreclosure
The 60-plus delinquency rate is usually combined with foreclosure rates for a more comprehensive measure of mortgage health. Loans overdue by 60 days haven’t entered foreclosure yet, which typically starts around 90 to 120 days past due.
If borrowers can’t make payments beyond this period, the foreclosure process begins, which may involve the bank seizing the home and selling it at an auction.
Insights on Mortgage-Backed Securities (MBS)
Mortgage-backed securities (MBS) involve pooling mortgage loans and selling them to investors. High delinquency rates within these pools can lead to cash flow issues, impacting the interest payments to investors and potentially causing asset depreciation.
Special Considerations
Economic downturns put homeowners at risk of losing their homes. However, measures like the CARES Act during the COVID-19 pandemic offered protections, such as forbearance and an eviction moratorium, to help affected homeowners.
Below are some steps borrowers can take if they’re eligible for forbearance due to delinquencies:
Call Your Lender
Contact your lender immediately to request forbearance. Continue making payments until you’re officially approved for forbearance.
Payment Responsibility
In forbearance, missed payments are added to the loan’s end term—so, borrowers will still owe these payments later.
No Penalties
Skipping payments under forbearance will not incur penalties or hurt your credit score.
Qualification Criteria
Not all mortgages qualify for forbearance. Typically, those backed by government-sponsored enterprises like Fannie Mae or Freddie Mac are eligible.
Example of 60-day Mortgage Delinquencies
In Q2 2020, the U.S. mortgage delinquency rate peaked at 8.22%, dropping significantly to 6.38% by Q1 2021. FHA-backed loans showed the highest delinquency rates, underscoring ongoing challenges despite improvements from mid-pandemic highs.
Related Terms: mortgage, subprime loan, adjustable-rate loan, foreclosure, notice of default.
References
- U.S. Congress. “H.R.748 — CARES Act”.
- U.S. Department of Housing and Urban Development. “CARES Act Forbearance Fact Sheet for Mortgagees and Servicers of FHA, VA, or USDA Loans”, Page 1.
- Congressional Research Service. “Federal Eviction Moratoriums in Response to the COVID-19 Pandemic”.
- U.S. Department of Housing and Urban Development. “Federal Housing Administration Extends Single Family Eviction Moratorium: Today’s Announcement Extends the Eviction Moratorium Through September 30 for Foreclosed Borrowers and Other Occupants and Notes Expiration of the Foreclosure Moratorium on July 31”.
- U.S. Department of Agriculture, Rural Development. “Rural Development COVID-19 Response”.
- U.S. Centers for Disease Control and Prevention. “CDC Issues Eviction Moratorium Order in Areas of Substantial and High Transmission”.
- U.S. Supreme Court. “Supreme Court of the United States: Alabama Association of Realtors v. Department of Health and Human Services: On Application to Vacate Stay”.
- Consumer Financial Protection Bureau. “CFPB Issues Credit Reporting Guidance During COVID-19 Pandemic”.
- Mortgage Bankers Association. “Mortgage Delinquencies Decrease in the First Quarter of 2021”.
