The report found that the portion of mortgage loans in active delinquency fell to an all-time low of 3.35%, lower than the precrisis high of 4.09% set in August 2008. Further, Black and Latinx-led households benefited the most from the improved pandemic economy in 2021, with delinquency rates dropping nearly 8 percentage points since February 2020, while the rates for White-led households dropped just 1.7 percentage points.
The rapid drop in delinquency rates is due, in part, to government financial assistance programs aimed at helping borrowers impacted by the pandemic, including the CARES Act forbearance program and stimulus payments.
However, Black Knight noted that despite the overall improved economic picture for formerly at-risk households, there are still racial disparities in the mortgage industry that need to be addressed in order to ensure continued stability for all homeowners. In particular, the report stated that “the disproportionately higher rates of delinquency among Black and Hispanic borrowers should be of concern to the industry” given that the gaps are wider now than before the pandemic.
Overall, the data suggests that the US housing market is faring well despite the ongoing pandemic, and mortgage delinquency rates are lower than pre-pandemic levels. However, the continuing racial disparities in mortgage performance indicate the need for targeted solutions for borrowers of color. Such solutions could include greater access to loan modification programs, down payment assistance for first-time homebuyers, and more equitable credit underwriting standards. A concerted effort from state and federal governments and the mortgage industry as a whole could go a long way towards ensuring that all borrowers are able to access safe and affordable housing.
According to a new report from Black Knight, mortgage delinquencies have decreased to pre-Great Recession levels. Delinquency rates for Black and Latinix led households dropped eight percentage points over the last year, while rates for White-led households dropped one and a half percentage points. This decrease is attributed to government assistance programs, such as CARES Act forbearance plans and stimulus payments, along with the improved economy in 2021. Despite this decrease, the report continued to note that there are still racial disparities in mortgage performance that need to be addressed to ensure stable housing for all borrowers.
The US housing market has held strong throughout the pandemic and remains stable despite a high rate of unemployment and foreclosure filings. However, the disparities between mortgage performance and delinquency rates among different populations indicate the need for targeted solutions to encourage equity and stability for borrowers of color. These solutions could include more accessible loan modification programs, down payment assistance for first-time homebuyers, and more equitable credit underwriting standards. The federal government and the mortgage industry have an opportunity to collaborate and create initiatives that will help all potential homeowners access safe and affordable housing.
This article was contributed on Aug 24, 2023
