Over 6 Million Americans Are Late on Their Mortgage Payments

Another housing crisis could be imminent. According to a new study from Deeds.com, as reported in Newsweek, over 6 million Americans are late on their mortgage payments, as reported on Jan. 27. The study was collated from the U.S. Census Bureau’s Household Pulse Survey data.

The combination of high interest rates from adjustable-rate mortgages and increasing insurance costs—often bundled into the monthly payment—has had a devastating financing effect for many homeowners. In addition, increased rents have resulted in 9.4 million renters struggling to make their monthly payments.

Mississippi had the highest number of late payments, with 15% of homeowners behind on their mortgages. Illinois was second, with 13.92% late, but according to the study, 24% of renters were delinquent on their payments to their landlord. Delaware also had a combined 14% of homeowners and tenants behind on their payments.

Inflation Has Outpaced Paychecks

S. Shepherd, a real estate expert from deeds.com, told Newsweek:

“This really shows how tough things are for a lot of people right now. Even though jobs are out there, wages haven’t kept up with how expensive everything, especially housing, has gotten. Inflation is outpacing paychecks, and for many families, it only takes one unexpected expense to fall behind. It’s a clear sign that while the economy might look strong on paper, not everyone’s feeling that recovery, and housing is where it’s hitting hardest.”

Many Homeowners Are Forgoing Insurance

The New York Times reported that many homeowners who do not have their mortgages and insurance bundled into one payment have been reducing their monthly costs by forgoing paying for insurance. This is particularly prevalent in areas affected by climate change.

According to data from the National Association of Insurance Commissioners and Federal Insurance Office at the U.S. Department of the Treasury, cancellation rates were highest in coastal areas in the Carolinas, including Hilton Head, Charleston, and Myrtle Beach, which are exposed to hurricanes. They were also high in parts of West Virginia, Arizona, and California.

As we have seen in California with the recent wildfires, damaged uninsured homes are prime targets for investors looking for teardowns to rebuild on or for flippers.

Insurance and Taxes Surpass Mortgage Payments for Many Homeowners

According to the Wall Street Journal, escalating homeowners costs are the highest they have ever been in comparison to mortgage payments. In September 2024, homeowners paid an average of 32% of their monthly payments to insurance and property taxes on single-family homes. That percentage is higher for homeowners who have paid a substantial amount of their mortgage.

Increasing home prices have contributed to upward spirals in taxes, while climate change and natural disasters have done the same for insurance. In five major metro areas—Rochester and Syracuse, New York; Omaha, Nebraska; New Orleans; and Miami—at least a quarter of borrowers spend more than half their monthly mortgage payment on taxes and insurance.

Increasing costs of homeownership have had a devastating effect on delinquencies, contributing to the 6.6 million number quoted in the Newsweek article. The jump in home insurance premiums between mid-2022 and mid-2023 led to an additional 149,000 mortgages becoming delinquent, according to Stephanie Johnson, an assistant professor of finance at Rice University, who has contributed to a recent working paper by researchers at New York University, Rice, and the Federal Reserve Bank of Dallas. The worst hit has been FHA mortgages, which are often favored by borrowers with poor credit and low down payments.

How Investors Should Approach Mortgage Delinquencies

Mortgage delinquencies do not necessarily translate into more deals for investors because delinquent homes have not yet gone into foreclosure. However, it is a sign that more foreclosures might be on the horizon.

Foreclosure numbers have been trending up. According to recent data from real estate analytics company ATTOM Solutions, end-of-year foreclosure numbers were up, particularly in Florida, New Jersey, and Nevada. However, overall foreclosures were down by 6% in 2024 over the previous year.

Moving from delinquency to foreclosure is not usually a fast process. States with the longest average time to foreclose in Q4 2024 were:

Louisiana (3,015 days)
Hawaii (2,505 days)
New York (2,099 days)
Wisconsin (1,989 days)
Nevada (1,750 days)

Generally, however, in most states, the delinquency to foreclosure period is under a year.

Try to Negotiate a Deal Before a House Goes Into Foreclosure

Rather than wait for a foreclosure to move through the system, meaning you have to compete with everyone else, an investor is better served to approach homeowners who are delinquent on their mortgages to work out a deal. These often include the following strategies.

Research tax and mortgage delinquencies

Websites such as ownerly.com, exactdata.com, and others charge a fee for tax and mortgage information. Alternatively, check public records, particularly county court records and the county clerk’s office or recorder of deeds. These records may contain information about mortgage liens, defaults, and foreclosure proceedings. Probate court is another helpful resource.

Be intentional and specific

Just because a house is delinquent doesn’t mean it will be good to flip or rent. If you get a lead on a house behind on mortgage payments, driving for dollars is often better than mass “We Buy Houses” mailings because you get to see the home in person and can strike up a conversation with the homeowner. Also, you won’t be competing with hundreds of other mailings.

Putting a human face to investing can encourage a homeowner to come out of their shell. I’ve lost count of the number of times I’ve received a phone call or text from someone wanting to buy a property of mine who knows nothing about it. They got my name from an out-of-state owner list and mass-texted or called me. Needless to say, none of those calls resulted in deals.

Work out a win-win scenario

Clearly, things aren’t going well for the homeowner if they are delinquent on their mortgage. Working out a scenario where you, the investor, will offer the homeowner a decent price and negotiate the move-out date to best suit them will go a long way to helping you land the house, should they be willing to sell. Alternatively, you could ensure a fast closing with no contingencies if they need money quickly and wish to move on with their lives.

Invest in tax liens

Defaulted taxes are easy to research, as the information is available on most local government websites. A tax lien certificate shows the taxes owed, along with interest and penalties. These are typically auctioned off to investors.

This doesn’t mean the investor has the right to the home, only to recover the tax money plus interest from the owner when they can pay back the balance. If the owner cannot manage this, the tax lien holder can begin the foreclosure process and eventually assume ownership of the property. Each state has its own laws about turning a tax lien purchase into a foreclosure.

Sheriff sales

Foreclosures that make it to a sheriff sale are usually a great place for investors to pick up deals once the auctioned price is greater than the amount owed to the bank.

That said, sheriff sales are not for rookies. Homes are sold as is, and due diligence needs to be done beforehand to make sure you are not bidding too high once renovation costs are factored in. It’s also a good idea to run a title report and be ready to pay cash for the home on auction day.

Invest in lead-generating websites

Lead-generating, pay-per-click websites can be pricey but worthwhile if, as an investor, you set them up correctly. Using phrases such as “sell my home fast,” “avoid foreclosure,” “cash for my house,” or “sell house as-is,” when combined with geotargeting to specific neighborhoods or areas where foreclosures are more common or where property delinquency rates are higher, can be particularly effective.

Also, mentioning pain points, such as “facing foreclosure” or “going through a divorce,” while adding a sense of urgency, such as “Sell your home fast” or “Get Fair, No Obligation Offer,” has been used on thousands of websites—but when done correctly, these tactics are still effective.

Final Thoughts

There’s been a lot of conjecture recently about the effectiveness of direct mail campaigns to attract motivated sellers. In other industries, SMS texting is the go-to way to market products and businesses, mainly retail, and it is now happening en masse in real estate.

Although the opening rates are higher than direct mail, a home is a unique proposition, particularly if you are dealing with distressed or older homeowners. That’s why engaging with sellers personally is often the path to securing a deal. Flexibility, empathy, and a fair price will be key tools in helping investors address the rising wave of delinquencies. The idea is always to create a win-win and not engage in predatory lowballing.