Here’s How Many Millions Will Be ‘Seriously Delinquent’ In Mortgage Payments When We Reach Peak Unemployment

A recent modeling analysis looked at three different scenarios for mortgage delinquency based on how high the unemployment level rises. The unemployment rate for March was 4.4%, but is expected to surpass 10% for April based on the number of filings during the past month. In their moderate, or ‘baseline’, scenario an estimated 3 million borrowers could be more than 90 days behind on payments (90 days is what they define as ‘seriously delinquent’, but could also include people in a forbearance program) if unemployment hovers around the 10% mark for at least the next year.

Specifically, this uses the assumption that the unemployment rate will rise to 12% for the second quarter of 2020 and stay above 8% for four subsequent quarters. Using those numbers they estimate the peak of delinquency in mortgages will occur in the first quarter of 2021 and will reach 5.1%, or just under 3 million borrowers ( the final number is based on their earlier analysis showing approximately 54 million first-lien loans in the U.S.).

Before the COVID impact, the rate for ‘seriously delinquent’ mortgages was 1.2%, one of the lowest on record. To put that in perspective, during the 3rd quarter of 2009 when the housing crisis was at one of its worst points, the percentage of homes either three months late on payments or already in foreclosure was 14.4%, according to a survey by the Mortgage Bankers Association. Approximately 5 million homeowners were more than 3 months behind on their mortgage.

In a more extreme scenario, what they’re calling the ‘pessimistic’ one, is if the unemployment rate rises to 20% this quarter and stays above 10% throughout 2021, they predict the number of delinquencies will rise to 5.5 million homeowners.

If their ‘optimistic’ scenario plays out then unemployment will peak at 6.4% this quarter and stay below 4% by the second half of 2021. This translates to 1 million homeowners being 90 days or more behind on their payments.

For a full rundown on the analysis, head to the CoreLogic blog.

This post first appeared on Forbes.com. To see the original, click here.