AZ Forbearance Update 4/7/2021

In this 15 minute video, Lydia Wietsma and I discuss forbearance, evictions, delinquencies, extensions, and appreciation.

Forbearance Numbers:

The number of loans in a forbearance plan dropped for the fifth straight week. This week we decreased to 4.90% from 4.96% of all loans are in forbearance. The number of borrowers remains right around 2.5 million.

Forbearance by Stage:

• 13.7% are in the initial stage, down from last week’s 13.8%.
• 84.1% are on extension, up from last week’s 83.4%. Over 21% of these borrowers have been on a forbearance plan for over 12 months.
• 2.2% are re-entries, down from last week’s 2.8%.

Forbearance exits from June 1, 2020 through March 28, 2021:

• 41.2% of borrowers either continued making their payments throughout their forbearance plan or got caught up upon exit. This is down from last week’s 41.7%.
• 13.9% of borrowers exited their plan, still behind on their payments and without a loss mitigation plan in place. This is a decrease from last week’s 14.1%.

Of the total exits in March 2021, 21% received a loan modification due to income declines.

Logan Mohtashami, the lead housing economist for HousingWire believes that the increased employment numbers may end forbearance sooner than expected.

Evictions:

For the third time, the CDC extended its eviction moratorium. This time through June 30^th otherwise it would have expired at the end of March.

Based on US Census surveys (not the big one) renters owe an estimated $60 billion in back rent payments and other housing costs.

Landlords who either cannot continue with the financial obligations of the investment or who are tired of owning it are starting to list and sell the properties with the non-paying renter included. There are investors who want properties and are willing to take on non-paying renters in order to acquire the property. The amount owed to the current landlord is often made up in the sales price.

This is a good option for struggling landlords.

Delinquencies:

In February delinquencies ticked up slightly from January. Experts believe this is mostly due to the short month. We will know when we see March’s numbers.

Despite the increase, 30-day lates are 19% below pre-pandemic numbers. There are still 5 times more 90+ day lates before the pandemic. That is about 1.7 million more than there were a year ago. This number includes those in a forbearance plan.

Foreclosures:

On Monday, the CFPB proposed furthering the ban on foreclosures through the end of 2021. Under current CFPB foreclosure rules, a borrower must be 120 days delinquent before the foreclosure process can start. I am not sure what the timelines are for those who were in the foreclosure process last year when the moratoriums were put in place. The services want to start where they left off, but will they be able to? It sounds like the CFPB does not agree though. The 120 days is to protect those who exiting their forbearance plan more than 90 days late from immediate foreclosure.

Servicers:

Servicers are hiring and preparing for more REOs and foreclosures. They are at the mercy of federal policy but they are preparing nonetheless.

Appreciation:

It is very difficult to make predictions in this current environment. Policy is changing regularly. We do know one thing that is helping all homeowners, struggling or not, it is the sky-high appreciation. Nationwide it is nearly 16% and here locally it is 19%. This gives homeowners options, whether or not they are struggling to make payments.