AZ Forbearance Update 1/27/2021

In this 15 minute video, Lydia Wietsma and I discuss the latest in forbearance, delinquencies, and sneaky foreclosures.

We do these videos to share the information with real estate professionals and struggling borrowers. People have options. There is no need to panic sell.

Forbearance Numbers:

Our forbearance numbers have been consistent over the past few months. There is a lot of movement, many are coming in and many are exiting their plans. We are still at about 2.7 million active forbearance plans. Week over week, we had a slight increase from 5.37% to 5.38% of all loans are in a forbearance plan.

Forbearance by Stage:

  • initial stage increased to 18.17%
  • extensions decreased to 79.31%
  • re-entries increased to 2.52%

Forbearance Exits from June 1, 2020 – January 17, 2021:

44.4% of borrowers are current upon exiting their plan.

The important number for us to watch remains the 13.4% of borrowers leaving their forbearance plan while still behind on their payments and with no loss mitigation plan. This is the group that needs help.

This means that if all 2.7 million borrowers exited their forbearance plan today, about 362,000 would leave with no plan in place.

Delinquencies:

Keep in mind not everyone who is delinquent on their payments are in forbearance. There are about 3.55 million loans in delinquency.

When the foreclosure moratoriums actually expire we will see a bunch of new foreclosures only because of the 13-month backlog on foreclosures, which will work itself out very quickly.

Courtesy of Black Knight’s First Look Mortgage Data for December 2020

Broker Price Opinions:

Currently, the moratorium expiration is March 31st which means the prep work has already started. Lydia’s servicing company is preparing for some significant movement in the coming months. One of their major clients recently ordered upwards of 30,000 broker price opinions (BPO) on properties that are all in forbearance.

There remains a lot of confusion around forbearance. Borrowers and the loan servicers themselves do not always know the full story. Borrowers are assuming they can refinance immediately after completing their forbearance plan, this is only the case when the borrower has made 3 consecutive, timely payments. Borrowers cannot miss payments and expect to refinance right away.

Sneaky Foreclosures:

Due to COVID no longer posting on house, posting on auction.com. Be sure to look there.

While we are on the foreclosure topic, we wanted to share the scary thing we learned about last week.  And they are sneaky foreclosures.

During the crash 10 years ago when homeowners negotiated loan modifications or filed Chapter 7 bankruptcy that allowed them to stay in their house and removed the monetary value of their second lien but did not remove the lien itself.

Those second liens that “went away” are now toxic loans. 60% of foreclosures out there right now are notes being purchased from the banks, that are selling for pennies on the dollar. Random people are buying the notes and then moving forward with foreclosure on the seconds. That borrowers thought were charged off. The lien buyers add interest on non-payments for the past 10 years.

Bottom Line:

Borrowers today have options. Now is not the time to panic sell.

Published by Sarah Perkins

Sarah has been with Lawyers Title of Arizona since 2004. As an award-winning sales executive, Sarah's role is to bring transactions to Lawyers Title. To do this, she focuses on supporting her clients and helping them navigate the ever-changing real estate space through thorough research and understanding of current trends impacting today's home buyers and sellers.

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