AZ Forbearance Update (video) 1/6/2021

In this 11 minute video, Lydia Wietsma and I discuss this weeks’ biggest news in forbearance. Each week, the plans, numbers, options, and timelines change.

One – Timelines:

There have been changes in the world of forbearance. And that is a good thing for struggling borrowers. Initially in the CARES Act, the COVID forbearance protection plans were to expire in October 2020. They were then extended to the end of 2020. Now, a recent announcement by the CFPB shows new timelines.

• FHA – Deadline Feb. 28, 2021
• VA – Deadline Feb. 28, 2021
• USDA – Deadline Feb. 28, 2021
• Fannie Mae – No deadline at this time
• Freddie Mac – No deadline at this time

To find out who owns a mortgage visit https://www.consumerfinance.gov/coronavirus/mortgage-and-housing-assistance/mortgage-relief-do-i-qualify/

Two – Forbearance Numbers:

According to the Mortgage Bankers Association, for the third week in a row, forbearance numbers stayed relatively flat. There are about 2.7 million borrowers in a forbearance plan which is roughly 5.53% of mortgages. For all of November and December we hung out at around 5.5%.

At the very end of the year forbearance entrances and exits slowed, likely due to the holidays. Weekly forbearance requests declined last week to the lowest levels since the week of March 15.

Hopefully, the latest stimulus provides aid to the struggling borrowers, despite not having any specific forbearance programs.

The forbearance numbers by stage are more telling. Borrowers entering the initial stage and borrowers re-entering forbearance both decreased. However, borrowers on extension increased to nearly 80% of all loans in forbearance.

Three – Forbearance Exits:

Of the cumulative forbearance exits for the period from June 1 through December 27, 2020:

About 45% of borrowers leaving their forbearance plan are current on their payments.

The group to pay attention to is the 13% of borrowers who left their plan without a loss mitigation plan in place. The others either refinanced, sold, deed-in-lieu (not much in AZ) or did a loan modification.

Many experts believe that struggling borrowers are more likely to sell rather than foreclose. This will benefit those struggling as a regular sale does not negatively impact credit and buyers have very limited options. Any additional inventory is welcome. In Maricopa County, there are only 4,100 single-family homes available and all of ARMLS has fewer than 6,000 listings available. We are 70% below where we should be. Nationwide we only have about 419,000 single-family homes available; low inventory is a challenge everywhere.

Four – Servicing:

Inspection requests have increased over the past 3 weeks. iBuyers are now hiring the servicing companies to do inspections on properties they are buying. They are having 2-3 inspections per acquisition.

Five – Options:

Struggling borrowers still have options. Forbearance continues to be available and American homeowners have more equity that has been available in years. The bottom line is this: Don’t panic sell.