“Seriously Delinquent” Mortgages To More Than Double In 2023 Due To Inflation

Mortgage News March 10, 2023

According to a new study by MAISY.com, seriously delinquent mortgages in households are expected to more than double by the end of 2023 to reach 580,000. Such mortgages are those that are 90 days or more in arrears and can trigger lender foreclosures. This level of delinquency has not been seen since 2016 and is predicted to impact over 1.6 million household members.

The study predicts that the year 2023 will be the time when households will exhaust COVID income payments and start relying more on credit cards and consumer loans to maintain their living standards. Unfortunately, this will lead to an increase in the number of households that will no longer be able to make timely mortgage payments, as 90+ day delinquencies are expected to jump from 257,000 in 2022 to 580,000 in 2023.

The decline in seriously delinquent mortgages from 2016 to 2019 was due to a booming economy with a real income increase of 7.8% and a reduction in unemployment from 4.7 to 4.0%. However, the Federal government’s COVID income policies generated $2.3 trillion in household income supplements in 2020 and 2021, which, along with forbearance and foreclosure moratoriums, led to the historic decline in serious mortgage delinquencies shown in the chart through 2022.

The deteriorating financial position of households is evident in data on household utility and loan payment arrears. About one out of six American families are behind in their energy bills with an average arrears of $788, and credit card, automobile, home equity, and other consumer loan arrears are steadily increasing by the month. This trend is expected to continue beyond 2022:Q3, indicating that households will be in worse financial shape at the end of 2023 than before the COVID pandemic began.

Overall, the study suggests that households’ deteriorating financial position will lead to an increase in seriously delinquent mortgages, which will impact a significant number of households. As excess savings are depleted, households will increasingly rely on credit cards and consumer loans to maintain their lifestyles, leading to further financial stress.

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