AZ Forbearance Update 6/2/2021

In this 14 minute video, Lydia Wietsma and I discuss the latest in forbearance, delinquencies, and loan servicing. Scroll down for the summary.

Forbearance Numbers:

This week was week number 13 of continued improvement in the forbearance numbers and are now down to 4.18% of loans in forbearance or about 2.1 million borrowers. This is fewer than half the total amount of borrowers who were initially in a forbearance plan in May 2020 which was about 8.47% of borrowers which was way below the predicted 30% of borrowers who were expected to go into forbearance. The chart below represents last week’s data but a powerful illustration nonetheless.

Forbearance By Stage:

• 11.6% of borrowers are in the initial stage of forbearance and new requests dropped down to their lowest level since March 2020.
• 82.8% of borrowers are on extension, down from previous weeks. Well over 50% of borrowers on extension have been in forbearance for over 12 months. This means that a large number of forbearance plans will be expiring soon.
• 5.6% of borrowers are re-entries, also up from previous weeks.

Forbearance Exits from June 1, 2020 through May 23, 2021:

46.3% of borrowers continued making their payments, got caught up upon exit, or paid off the loan with a refinance or sale upon exit. This number has declined slightly in recent weeks.

15% of borrowers exited their plan, still behind on their payments and without a loss mitigation plan in place. It is critical for struggling borrowers who are nearing the end of their forbearance plan to call their lender or loan servicer to discuss the options. There are options.

Based on this info, if 15% of the 2.1 million borrowers exit forbearance who are still behind on their payments and without a loss mitigation plan, means that nationwide there would be about 315,000 borrowers who would need help upon exit. Divided by 50 states, each state would have about 6,300 borrowers without a loss mitigation plan. These are the ones who need to know their options so they do not lose their homes. And 315,000 is a far cry from the 10 million foreclosures we had nationwide during the crash.

Delinquencies:

In April, the national delinquency rate dropped to 4.66%. A borrower who is in forbearance and not making payments is counted in these numbers. 900,000 borrowers have gotten caught up in the past 12 months. At 1.768 million, the seriously delinquent rate remains 4x the rate from February 2020.

Black Knight data services, which supplies much of the data we discuss, is predicting that delinquency rates will normalize to pre-pandemic levels by the end of this year.

Please note the 1.8 million borrowers are I mentioned in the video are not the total number of borrowers delinquent but a rounded number of the total borrowers that are 90+ days late.

Deadline – June 30, 2021:

The deadline to enter into a forbearance plan is June 30, 2021. Time is of the essence and struggling borrowers must reach out to their lender or mortgage servicer to get started. Check out the available resources below.

The ban on rental evictions and the foreclosure moratorium also expire on June 30, 2021. It is possible that any of these programs may be extended at any time without any warning. The CFPB proposed a foreclosure moratorium through the end of 2021, which is still being discussed.

Servicing:

Requests for inspections are up! Lydia received 17 inspection requests in 2 days and not all are iBuyer owned. Sometimes it is to deliver letters encouraging borrowers to call their servicers to find out about their options. A large lender is offering 0% interest on second loans for the deferred amount. The servicing companies are hiring more staff to prepare the June 30 expirations. There is a backlog of pending foreclosures due to the moratorium so we will see an increase in notices of trustee sale.

The Market:

Do not overprice listings. Despite a 32% year-over-year appreciation rate, the market is starting to slow a bit. Some listings are lasting days rather than hours on the market.

Resources:

• Rental assistance is available through the Arizona Department of Housing website at https://www.saveourhomeaz.gov/self-assessment/
• The CFPB, FHFA, HUD, VA and USDA created a joint effort mortgage and rental assistance platform, for more information visit https://www.consumerfinance.gov/coronavirus/mortgage-and-housing-assistance/