AZ Forbearance Update 3/10/2021

In this 12 minute video, Lydia Wietsma and I discuss forbearance, demand, specific industries, and our one-year anniversary.

Last week was our final week of having normal year over year comparisons. As of this week, the one year anniversary of our economy beginning to shut down, the year over year comparisons will get weird.

What we do know is that last week purchase mortgage applications were up 7% week over week and 2% year over year. Demand remains higher than supply, both nationally and locally. I am impressed to see the application increase when rates have increased as quickly as they have. The reason for the continued demand, according to several leading economists, is based on today’s demographics. The largest group of the largest generation is about 26-34; prime home-buying age. These ‘Replacement buyers’ as some call them, will keep demand high through the end of 2024.

We need to keep the expected, elevated demand in mind when we look at the forbearance numbers and speculate about foreclosures.

Forbearance:

Currently, there are about 2.6 million borrowers in forbearance or about 5.2% of loans. While this number has stayed flat over the past few months, it did decrease to a new low since the forbearance plans were introduced last March in the CARES act.

Forbearance by Stage:

• 14.6% of forbearance plans are in their initial stage, which is either 3 or 6 months depending on loan specifics.
• Nearly 83% of all plans are on extension.
• 2.6% are re-entries.

Forbearance exits from June 1, 2020 through February 28, 2021

• Nearly 43% of all forbearance plan exits are current on their mortgage upon plan exit.
• 13.8% of forbearance exits, exit without a loss mitigation plan in place.

Foreclosures:

There is increasing talk of foreclosure challenges coming. While, yes I do expect there to be an increase in foreclosure filings, because there are virtually none now, I do not expect a huge amount of foreclosures going to auction. 90% of borrowers have equity and these homeowners will have the ability to do a normal sale and walk away with money in their pocket. We are not in the overleveraged situation we were in 12 years ago. And with the replacement buyers, there will be buyers to purchase the properties as they come on the market.

Remember over the past 22 years, on average there are about 67,000 foreclosures a month nationwide. They are to be expected but we will not see a wave for foreclosures.

Stimulus:

The latest stimulus package, which is being debated in the House today, has several provisions for housing and how those provisions are implemented could impact struggling borrowers, landlords, renters, and future buyers. We will know more about the specifics very, very soon.

Lydia did a deep dive into the travel industry and what is happening, particularly with airline employment. The newest stimulus does have more provisions that are industry-specific. The stimulus is back in the House now and once it is approved it goes to the White House for President Biden’s approval to be signed into law. It will happen soon.

For more details on the TSA travel numbers, check out this website.

Also, Lydia’s inspection requests have decreased. After reaching nearly 10 a day recently, they have dropped down to 1 or 2 a day. We are looking into the reasons for such a dramatic decrease and will have more info for you next week.