Shelter-in-place mandates and quarantine orders, combined with business shutdowns and job layoffs, have led to an annual estimated decline in the United States’ real gross domestic product (GDP) of 32.9% during Q2 2020.
COVID-19 has also led to an increase in mortgage delinquency rates. Housing data company CoreLogic pointed out that in May 2020 (the most recent stats available), 7.3% of U.S. home mortgages were in some stage of delinquency (30 days or more past due). Furthermore, the share of mortgages transitioning from current to 30 days past due increased by 2.2% in May 2020, a significant jump from the 0.8% reported in May 2019.
Breaking this information by state, CoreLogic reported that New York topped the nation with the highest mortgage delinquency rate of 11.4%, followed by New Jersey, Louisiana, Mississippi and Florida.
Why these states?
Mortgage delinquencies occur for one reason: People don’t, or can’t, make their payments. And in the five states with the highest mortgage delinquency rates, there’s a good reason for this: high unemployment rates.
Experts study many things to determine an economy’s strength, including:
- The unemployment rate (the number of unemployed, divided by the total number in the labor force)
- The labor force participation rate (the sum of all employed workers and those actively seeking employment, divided by the total non-institutionalized, civilian, working-age population)
The Federal Reserve Bank of St. Louis reported that New York State’s unemployment rate stood at 15.7% in June 2020, while the labor force participation rate was at 60.1%, a slight decline from 61.1% in January 2020. In the same period, the other four states in CoreLogic’s top five also reported high unemployment rates and moderate-to-large labor participation rate decreases:
- New Jersey — Unemployment rate: 16.4%; Labor force participation rate: 63.9%, down from 64.8% in January 2020
- Louisiana — Unemployment rate: 9.7%; Labor force participation rate: 56.6% down from 58.7% in January 2020
- Mississippi — Unemployment rate: 8.7%; Labor force participation rate: 52.1% down from 55.9% in January 2020
- Florida — Unemployment rate: 10.4%; Labor force participation rate: 55.4%, down from 59.9% in January 2020
New York and New Jersey were also among the first states to issue shelter-in-place orders and non-essential business shutdowns in March 2020. These shutdowns put thousands of people out of work, including those in the hospitality and entertainment industries. In many cases, those layoffs are continuing.
Further to the south, Louisiana, Mississippi and Florida underwent their own shutdowns, and while the unemployment rates aren’t as high as those in the Northeast, labor force participation rates tell a different story. These states are highly dependent on tourism dollars, and COVID-19 has taken its toll on the tourism industry worldwide.
The 5 states with the fewest late mortgage payments
Meanwhile, in the five states where people miss the least amount of mortgage payments, the unemployment rates are also lower. For example, Idaho and South Dakota, which appear at the bottom of the CoreLogic list, reported mortgage delinquency rates of 3.9%. And Idaho’s June 2020 unemployment rate of 5.6% and South Dakota’s 7% figure were well below the numbers reported by New York (15.7%) and the other states reporting the most missed mortgage payments.
Here are the employment metrics for the states where people are missing the least amount of mortgage payments:
- Idaho — Unemployment: 5.6%; Labor force participation rate: 63.7%; down from 64.2% in January 2020
- South Dakota — Unemployment: 7.0%; Labor force participation rate: 69%; no change from 69% in January 2020
- Wisconsin — Unemployment: 8.5%; Labor force participation rate: 65.7%; down from 66.9% in January 2020
- Iowa — Unemployment rate: 8.0%; Labor force participation rate: 66.2%; down from 71% in January 2020
- Montana — Unemployment rate: 7.1%; Labor force participation rate: 62.4%; down from 62.8% in January 2020
Even though these state’s unemployment rates were lower, it doesn’t mean they didn’t struggle with employment issues due to the pandemic. But it does demonstrate that the primary industries in these states seem to be rebounding more quickly than those in New York, New Jersey and the Gulf Coast regions.
Are you struggling to make your mortgage payments?
Whether you live in one of the top mortgage-delinquent states or not, you can obtain relief if you are out of work due to COVID-19.
On March 27, 2020, President Donald Trump signed the Coronavirus Aid, Relief and Economic Security (CARES) Act. Under this law, homeowners with mortgages backed or funded by the federal government programs have certain protections from foreclosure and could be entitled to mortgage forbearance. Forbearance means your mortgage servicer or lender can work with you on options if you can’t pay your loan.
Such options can range from pausing payments (without additional penalty or interest fees) to lowering monthly costs. Also, under the CARES package, you could temporarily postpone or reduce mortgage payments for 360 days, if the following government agencies back your loan:
- Federal National Mortgage Association (Fannie Mae)
- Federal Home Loan Mortgage Corporation (Freddie Mac)
- Department of Housing and Urban Development (HUD)
- U.S. Department of Agriculture (USDA)
- Federal Housing Administration (FHA)
- Department of Veteran Affairs (VA)
However, forbearance doesn’t mean you’re off the hook. Once the period ends, you are required to reimburse your lender through one of the following methods:
- Repayment plans, which allow you to catch up gradually on suspended payments while making your monthly disbursement.
- Normal payment resumption, in which you reimburse suspended payments in an affordable manner (or pay off all suspended payments at once).
- Loan modifications, which allow changes to your loan term.
To get the mortgage forbearance process started, contact your lender for more information. Additionally, even if any of the above agencies does not back your loan, you could still be eligible for relief.
Too long, didn’t read?
States with higher mortgage delinquency rates can generally be traced back to higher unemployment and lower labor participation rates, such as those experienced during the coronavirus pandemic. If you are among the unemployed and are struggling to make your monthly mortgage payments, don’t try to do it alone. Get in touch with your lender to determine forbearance options that could help you out. Doing so now could help you avoid the pain of foreclosure.
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