AZ Forbearance Update (video) 12/30/2020

In this 15 minute video, Lydia Wietsma and I discuss this weeks’ biggest news in forbearance. For a short holiday week, a lot is happening.

One – Forbearance Numbers.

When the CARES Act passed in March, creating forbearance plans, it was expected that around 40 million borrowers would enter an available plan. In reality, since March, about 4.3 million entered a plan. Now, as we end the year, 5.5% of loans or about 2.7 million borrowers remain in a forbearance plan. And nearly 79% of those in forbearance are on extension. Initial plans are 3 – 6 months long and the extensions are 3 – 6 months long.

Based on these timelines, a huge number, 367,000, forbearance plans are set to expire in January. How many will go on extension remains to be seen.

Roughly 45% of borrowers leaving forbearance are caught up and current on their payments.

Two – FHA Extension.

The biggest news in forbearance is FHA’s extension for entering a forbearance plan. If a borrower has an FHA loan they can now call their servicer through February 28, 2021 to get started on a forbearance plan.

For all other mortgage types, the deadline is tomorrow.

Three – Delinquencies.

The biggest news in forbearance is FHA’s extension for entering a forbearance plan. If a borrower has an FHA loan they can now call their servicer through February 28, 2021, to get started on a forbearance plan.

For all other mortgage types, the deadline is tomorrow.

Four – Equity.

For anyone concerned about what the market is doing right now, please keep in mind these things:

• Demand continues: Mortgage applications are still increasing and for the week ending on 12/18, mortgage applications are up 26% year over year.
• Prices have been increasing since 2012.
• American homeowners with a mortgage have an average of $195,000 in equity, a struggling homeowner can sell their home and walk away with cash in their pocket.

In 2020 housing has been the leading sector in our entire economy. Experts predict more of the same in 2021. Rates are expected to stay low with demand high. Many expect to see a strong spring selling season, as long as inventory increases.

Five – Increased Inspections.

Lydia is seeing a lot more servicing requests from the loan servicing company she works with. Last week had a 3 day work week and this week is 4 and each week she has gotten 10 inspection requests, which is more than she has received in two back to back weeks this year. She was told that they are hiring and training more employees now too. Does this mean that they are gearing up for some big things in 2021? The answer remains to be seen.

Six – Not Free Money.

The forbearance plan deferrals are not forgiven, they are to be repaid. This is not free money. Lydia shared another concerning story about borrowers who were not negatively affected by the pandemic who took forbearance and spent the money elsewhere. How many instances of this will come out? We know there will be consequences. The significance of those consequences will be seen in the coming months.