In this 10 minute video, Lydia Wietsma and I discuss the latest in forbearance, delinquencies, and loan servicing.
Consumer Finance Protection Bureau (CFPB)
The CFPB has put loan servicing companies under a microscope. It is watching the servicers to ensure that borrowers in forbearance have been handled properly.
“I think the math speaks for itself how well the forbearance program has worked, and it’s one of the few times in my career that I have seen a government-initiated program adopted as well and executed as well by the industry as this one,” said Rick Sharga, executive vice president of RealtyTrac.
After 2 weeks of large drops, we had a small drop in total loans in forbearance. As of April 18, about 4.49% of loans were in forbearance, a slight decline from 4.50%. This is a decline of nearly 5,000 borrowers to about 2.25 million.
Forbearance by Stage:
- 12.9% of loans in forbearance are in the initial stage, down from the previous week’s 13.1%
- 82.4% are on extension, up from last week’s 82.1%. More than 40% of borrowers on extension have now been in a forbearance plan for over 12 months.
- The remaining 4.7% are re-entries, down from last week’s 4.8%.
Forbearance exits from June 1, 2020 through April 18, 2021
47.3% of borrowers continued making their payments throughout the forbearance plan, got caught up upon exit, or paid off the loan with a refinance or sale.
14.6% of borrowers exited their plan, still behind on their payments and without a loss mitigation plan in place. This number remained flat from last week.
- The national delinquency rate dropped 16.4% to 5.02% in March. This is about 500,000 borrowers!
- Over the past 20 years, delinquencies have fallen by nearly 10% on average in March due to tax return and other seasonal funds being used by homeowners to pay down past-due mortgage debt
- Despite March’s strong performance, some 1.9 million mortgage-holders – including those in active forbearance that are behind on their payments – are at least 90 days past due on payments
- There are 1.5 million more such serious delinquencies than at the onset of the pandemic, nearly five times pre-pandemic levels
New Low-Income Refinance Option:
This morning FHFA announced a new refinance option for low income borrowers.
To qualify for this option, beyond owning a GSE-backed mortgage, a borrower must have an income at or below 80% of the area’s median income and have been current of their payments for the last six-months, with no more than one payment missed in the last 12. Borrowers must also not have a mortgage with an LTV ratio greater than 97% and a DTI no higher than 65%. Lastly, borrowers must have a FICO score no lower than 620.
Now, the FHFA said the new refi option could save borrowers an average of between $100 and $250 a month.
Under the new refi option, lenders must ensure that the borrower saves at least $50 a month in their mortgage payments while simultaneously dropping their interest rate by at least ½ of a percent or 50 basis points. This could potentially knock an already historically great rate such as 3.5% down to 3% with the new product.
Lydia’s servicing company has added another local iBuyer to its list of clients they are doing inspections for. Opendoor has been hiring this company since July for its inspections.
Inspections have been consistent.
While foreclosures remain at a standstill, servicing companies are doing more inspections on properties that were inspected 12 months ago.
Sarah Perkins is an award winning account executive and has been in title sales since 2004. As the Director of Industry Research & Senior Account Executive, Sarah’s role is to bring real estate transactions to Navi Title. Sarah supports her clients by helping them navigate the ever-changing real estate space through thorough research and understanding of current trends impacting today’s home buyers and sellers.