Don’t Expect a Flood of ForeclosuresOnly a few homeowners are significantly lagging in their mortgage payments currently. One of the primary factors contributing to the high foreclosure rates during the previous housing crisis was the lenient lending criteria that facilitated mortgage approvals for individuals, even if they lacked the means to repay. During that period, lenders were not stringent in evaluating factors such as credit scores, income, employment status, and debt-to-income ratio of applicants.
However, the situation has now changed with stricter lending criteria in place, resulting in a larger pool of qualified buyers who possess the financial capacity to fulfill their mortgage obligations. Data sourced from Freddie Mac and Fannie Mae indicates a decrease in the number of homeowners facing substantial delays in mortgage payments, as depicted in the accompanying graph.
Molly Boese, who holds the position of Principal Economist at CoreLogic, offers insight into the limited challenges faced by homeowners in meeting their mortgage obligations.
“May’s overall mortgage delinquency rate matched the all-time low, and serious delinquencies followed suit. Furthermore, the rate of mortgages that were six months or more past due, a measure that ballooned in 2021, has receded to a level last observed in March 2020.”
Boese clarifies that for a notable increase in foreclosures to occur, there would need to be a notable surge in the number of individuals unable to meet their mortgage payments. Given the substantial proportion of current buyers who are successfully fulfilling their payment commitments, the emergence of a foreclosure wave appears improbable.
For those concerned about the possibility of a widespread wave of foreclosures, it's important to note that current data does not indicate such an occurrence. In reality, a significant portion of qualified buyers are consistently honoring their mortgage payments.