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More People Paying Mortgages on Time

Fewer borrowers are late making their house payments, according to a real-estate data firm, which credits strong employment numbers and tougher lending standards for the decline in delinquencies.

Nationally, 3.2% of jumbo mortgages were 30 days or more past due in May, a 1.1 percentage-point decline from May 2016, Calif.-based data firm CoreLogic found. The serious delinquency rate, defined as 90 days or more past due, was just 2.1%—the lowest rate in nearly a decade.

The Las Vegas metropolitan area had the highest 30-day jumbo delinquency rate in the nation in May, with 9.8% of loans with a balance of $750,000 or more delinquent. “Las Vegas was a boom/bust market, so that’s not at all a surprise,” says Sam Khater, CoreLogic’s deputy chief economist.

Mr. Khater says that markets with the lowest jumbo delinquency rates, such as Boulder, Colo., (0.6%) and Austin, Texas, (0.9%) have rapidly growing economies with strong in-migration and employment numbers. Economies in the worst-performing markets, such as the Las Vegas and Sarasota, Fla., metros, are lagging, Mr. Khater says, even though the real-estate markets may be coming back.

Jumbo borrowers who pay their mortgages late or miss payments entirely will be dinged on their credit histories. Late payments remain on a credit report for seven to 10 years, says Bethy Hardeman, chief consumer advocate for finance site Credit Karma. The impact on your credit score “varies based on where you’re starting,” she adds, “but it’s not unusual if you default to lose 50 to 100 points.” But that doesn’t mean that delinquent borrowers will never be able to qualify for a jumbo mortgage again. Lenders of conforming loans have to comply with strict investor guidelines to sell loans on the secondary market. But jumbo lenders, many of which hold on to loans in their portfolio, have lots of discretion—even for borrowers with blips on their credit report.

“We have a set of criteria that we believe matches our risk appetite,” says Diane Morais, president of consumer and commercial banking products for Ally Bank. “Because we retain these loans on our balance sheet, more factors can come into the decision process.”

Ms. Morais says that Ally considers the cause of a delinquency or default and will take extenuating circumstances into consideration. “Was there just one late payment or an extended pattern of past-due behavior?” she says. “There is no hard-and-fast rule where I would say that under no circumstances would someone who’s had a delinquency on a jumbo loan ever be approved again.”

Jumbo jungle tips

• Be proactive. If it’s unavoidable for you to miss a mortgage payment, call your lender beforehand. A lender that holds your mortgage in its portfolio will likely have more flexibility than one that sold the loan, but many are willing to assist borrowers when possible—especially when there are extenuating circumstances. “It’s my credit risk, my judgment and my experience that says what’s the best way to work with the borrower,” says Scott Witherspoon, chief credit officer of Affinity Federal Credit Union, a portfolio lender in Basking Ridge, N.J. Possible solutions to avoid foreclosure: Selling the house and paying off the mortgage if there is sufficient equity; a mortgage modification that offers lower payments or interest rates; or, for more serious delinquencies, a short sale or deed in lieu of foreclosure.

• Control the credit you can. Even if you’re delinquent on your mortgage, you can still exercise significant control over your use of credit—and ultimately, rebuild your credit score. Make payments on credit cards and other loans on time, and keep your credit utilization rate down by using no more than 30% of your available credit. “That shows that you’re using credit responsibly,” Ms. Hardeman says.

• Consider credit counseling. Borrowers who can’t create a budget or have trouble sticking to one might benefit from credit counseling. The National Foundation for Credit Counseling has a directory of accredited firms.

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