In this 19 minute video, Lydia Wietsma and I discuss the latest in forbearance, extensions, and tax liens. We share this information to help provide guidance for real estate professionals and struggling borrowers.
Deadline & Extensions:
There is a lot of news around forbearance right now. Today is the final day to get started on a forbearance plan. At the end of the day, no new forbearance plans will be created.
Do not confuse the end of forbearance with the other moratoriums that were extended last week. Both the eviction and foreclosure moratoriums were extended for one more final month. Those moratoriums will expire at the end of July.
The forbearance numbers continue to decline. About 3.93% of mortgages or roughly 2 million borrowers remain in a plan after 17 weeks of declines.
Forbearance by Stage:
- 10.7% of borrowers are in the initial stage. Initial requests this week dropped to their lowest rate since forbearance plans started 15 months ago. According to Mike Fratantoni, MBA’s senior vice president and chief economist, the pace of new forbearance requests remained at an acutely low level of 4 basis points or 0.04% of borrowers.
- 83.1% of borrowers are on extension, down from recent weeks.
- 6.2% of borrowers are re-entries, up from recent weeks also.
Forbearance Exits from June 1, 2020 through June 20, 2021
45.2% 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 continues to decline slightly each week.
15.2% of borrowers exited their forbearance plan still behind on their payments and without a loss mitigation plan in place.
Even with the end of forbearance, borrowers still have options. Black Knight estimated that of the loans in forbearance, 96% have at least 10% equity in their homes – typically enough to sell through traditional real estate channels to avoid a default or short sale.
On Tuesday, the Consumer Financial Protection Bureau (CFPB) extensive mortgage servicing regulations it hopes will prevent “unwelcome surprises” for borrowers exiting forbearance.
The CFPB outlined the rules for mortgage servicers to follow in the coming months and them, “Unprepared is unacceptable.”
Servicers may initiate foreclosure proceedings only after the borrower has submitted a loss mitigation application, and either isn’t eligible for, breaks or rejects the loss mitigation plan. If the borrower was already six months past due by March 2020 or if the property is abandoned, the loan servicer is exempt from those requirements.
The CFPB rule also outlines escrow shortages which can be included in the loss mitigation option. There are limits on how much servicers require borrowers to deposit in an escrow account over the next year.
Lenders and servicers may offer streamlined loan modifications, as long as the modification does not increase the monthly payments, or increase the mortgage term beyond 40 years. Servicers may not charge extra fees for the loan modification, and if a borrower accepts a loan modification, the servicer must waive any late fees.
The CFPB wants servicers to be proactive about communicating with borrowers about their options, especially if they are not in a forbearance plan.
If borrowers are still delinquent, servicers must contact them ahead of the end of their forbearance period to give them the option to complete a loss mitigation plan.
Finally, the rule adds clarity to the definition of financial hardship to mean any hardship that the pandemic brought on, either indirectly or directly, from March 2020 to February 2021.
The rule will take effect at the end of August.
To learn more about the CFPB, submit a complaint, or better understand borrower protections visit https://www.consumerfinance.gov/
Servicers, BPOs, and Tax Liens:
BPO requests are up. 15 new ones last week and 16 so far this week. Lydia is not only giving a statement of value but is also checking the exterior condition and whether or not the property is vacant.
In addition to the regular BPO visits, she is also being asked to deliver tax lien letters to homeowners that do not have a mortgage but are behind on their property tax payments. Tax lien foreclosures have also been suspended and will resume when the moratorium is lifted.
Buyers and sellers need to let their Realtor know if they have done a forbearance on any property in the country. It is not something that can be just swept under the rug and it is not something to be ashamed of. As inventory grows strategies change. Forbearance was created to keep people in their homes and has been successful at doing so.
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.