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October 2023 » thefivestar.com 75 October 2023 J O U R N A L As employment numbers generally play a key role in the direction of forbear- ance volume, the U.S. Bureau of Labor Statistics (BLS) reported that total nonfarm payroll employment increased by 187,000 in August, and the unemployment rate rose to 3.8%, as employment continued to trend up in healthcare, leisure and hospitality, social assistance, and construc- tion, as employment in transportation and warehousing declined. The unemployment rate rose by 0.3 percentage point to 3.8% in August, and the number of unemployed persons increased by 514,000 to 6.4 million. Both measures are a little different from a year earlier, when the unemployment rate was 3.7%, and the number of unem- ployed persons was six million. OCC: NEARLY 7,400 NEW FORECLOSURES INITIATED IN Q2 T he Office of the Comptroller of the Currency (OCC) has reported on the performance of first-lien mortgages in the federal banking system during Q2 of 2023 through June 30, 2023. The OCC Mortgage Metrics Report, Second Quarter 2023 showed that 97.3% of mortgages included in the report were current and performing at the end of the second quarter, compared with 97.6% in the first quarter of 2023. Performance improved compared to the second quar- ter of 2022, when 97% of mortgages were current and performing. For loans with forbearance activity covered by the Coronavirus Aid, Relief, and Economic Security (CARES) Act, reporting banks are following guidance from the U.S. Department of Housing and Urban Development (HUD), Federal Housing Finance Agency (FHFA), and the respective government agencies and government-sponsored enterprises (GSE) for the calculation and reporting of de- linquency and credit bureau reporting. The percentage of seriously delin- quent mortgages—defined as mortgages that are 60 or more days past due and all mortgages held by bankrupt borrowers whose payments are 30 or more days past due—was 1.1% in the second quarter of 2023, the same as the previous quarter, and a decrease compared to 1.5% a year ago. Loan delinquencies are reported using the Mortgage Bankers Association (MBA) convention that a loan is past due when a scheduled payment has not been made by the due date of the following scheduled payment. Mortgage servicers initiated 7,480 new foreclosures in the second quarter of 2023, a decrease from the prior quarter, and from a year earlier. The new foreclosure volume in Q2 2023 is lower than pre- COVID-19 pandemic foreclosure volumes. Mortgage servicers also completed 8,623 loan modifications during the second quarter of 2023, a 16.9% drop from the previous quarter's reported 10,375 loan modifications. Of the 8,623 loan modifica- tions completed during the quarter, 4,372 (50.7%), reduced the loan's pre-modifica- tion monthly payment, and 7,279 (84.4%), were "combination modifications"—mod- ifications that included multiple actions affecting the affordability and sustain- ability of the loan, such as an interest rate reduction and a term extension. The first-lien mortgages included in the OCC Mortgage Metrics Report, Second Quarter 2023 comprise 22% of all residential mortgage debt outstanding in the United States, or approximately 12 million loans totaling $2.8 trillion in principal balances. WHAT PERCENT OF MORTGAGES ARE DELINQUENT? T he latest iteration of the Loan Performance Insights Report published by CoreLogic covering the month of July found that some 2.7% of all U.S. mortgages had some sort of foreclosure filing against them, which represents a 0.1% increase from July 2023 and down 0.3% year over year. To gain a complete view of the mortgage market and loan performance health, CoreLogic examines all stages of delinquency. In July 2023, the U.S. de- linquency and transition rates and their year-over-year changes, were as follows: » Early-Stage Delinquencies (30 to 59 days past due): 1.3%, unchanged from July 2022. » Adverse Delinquency (60 to 89 days past due): 0.4%, unchanged from July 2022. » Serious Delinquency (90 days or more past due, including loans in foreclo- sure): 1%, down from 1.3% in July 2022 and a high of 4.3% in August 2020. » Foreclosure Inventory Rate (the share of mortgages in some stage of the foreclosure process): 0.3%, unchanged from July 2022. » Transition Rate (the share of mortgag- es that transitioned from current to 30 days past due): 0.7%, unchanged from July 2022. U.S. mortgage performance held strong in July, with both overall delin- quency and foreclosure rates still hov- ering near record lows. Only Idaho saw overall delinquencies rise year over year, but rates in that state remain very low. Meanwhile 16 metro areas posted slight annual delinquency upticks, a drop from the previous month, when 31 met- ros posted increases. With hurricane sea- son in full swing in the late summer and early fall, some areas of the United States could see typical seasonal delinquencies rise later this year and into 2024. "Overall U.S. mortgage delinquen- cies remained near a record low in July, with the share of homes entering that status or progressing to later stages either unchanged or lower," said Molly Boesel, principal economist for CoreLogic. "Since most borrowers have substantial amounts of home equity, those who have locked in low mortgage rates that do en- ter later stages of delinquency will most likely not experience foreclosures." "And while home equity gains have slowed from their former rapid pace," Boesel continued, "CoreLogic projects that home price growth will pick up over the next year. Borrowers should continue to build equity over the coming months, even if at a more moderate rate."