Mortgage Distress during the Great Recession

What is mortgage distress? And just how bad was mortgage distress during the Great Recession?

During a Dialogue with the Fed event in September 2020, Assistant Vice President and Lead Economist in Supervision William R. Emmons looked at mortgage distress experienced by households over the past 40 years.

Mortgage distress occurs when a homeowner is seriously delinquent—missing at least three mortgage payments but not yet being in foreclosure—or is in the foreclosure process, he noted.

The Great Recession (2007-09) saw an extreme level of distress, with about 10% of U.S. mortgages in distress by 2009, Emmons noted, adding that the worst previous episodes of distress were at much lower levels.

“And then, remarkably, this level of distress continued for a couple of years, and that’s even after those mortgages that were terminated through foreclosure or early sale, forced sale,” he said.

Emmons also emphasized how slow-moving the housing crisis was, and that it took several years to pass.

“Even after that, we had a long, long period of a very, very distressed household sector,” he said.

Additional Resources

• On the Economy: How Many People Doubled Up after Losing Housing in Aftermath of Past Recessions?
• On the Economy: Racial and Ethnic Disparities in Housing Distress during the Pandemic
• On the Economy: How Many Mortgage Foreclosures Is Forbearance Preventing?