In this 16 minute video, Lydia Wietsma and I discuss the latest in forbearance, delinquencies, foreclosures, and loan servicing.
The forbearance numbers have improved a lot in the past month. We are down to 3.48% of borrowers or roughly 1.74 million borrowers are now in a forbearance plan. This is huge progress. Think about where we were in May of 2020 with nearly 4.76 million loans in forbearance which is over 9% of borrowers!
The declines have been slowing. In April we had a 12% drop in homeowners in forbearance. In the past 30 days, we have had a 5% drop. Since there is a limit on how long an owner can be in forbearance, it is expected that about 900,000 borrowers will exit the program in Q3 and Q4 this year.
About 7.25 million borrowers have been in a forbearance plan at one time or another throughout the pandemic, which is about 14% of all homeowners nationwide.
I have been asked a lot for forbearance info by state and I came across this chart from Matthew Gardner, Windermere’s chief economist. It is older, the data is from March, so today’s numbers are much lower but it is a nice view to see the state differences. In March in Arizona, there were about 4.2% of borrowers were in forbearance.
Forbearance by Stage:
- 9.8% of total loans in forbearance are in the initial forbearance plan stage.
- 83.2% are in a forbearance extension.
- The remaining 7.0% are forbearance re-entries.
Forbearance Exits from June 1, 2020 through July 18, 2021
44% of borrowers continued making their payments, got caught up upon exit, or paid off the loan with a refinance or sale upon exit.
15.7% of borrowers exited their forbearance plan still behind on their payments and without a loss mitigation plan in place.
Remember borrowers who are behind on their payments and in forbearance are also counted in the total delinquency numbers. Total delinquency rates in June dropped to 4.37%, the lowest since the start of the pandemic. There are about 2.32 million borrowers behind on at least one payment and about 1.5 million that are 90+ days behind on their payments. This number has been the slowest to move and remains much higher than pre-pandemic numbers.
In an effort to keep foreclosures down, HUD, USDA, and the VA now offer the option for borrowers to extend the length of their loan to reduce monthly payments.
The foreclosure moratorium expires on Saturday but that doesn’t mean that lenders will start the foreclosure process immediately. The CFPB has put in place very specific rules and processes for lenders and servicers to adhere to which helps enable struggling borrowers to modify their current loans.
The properties which can be foreclosed on immediately will be vacant, abandoned properties, and the owners are not reachable.
Do not expect to see a flood of foreclosures as the moratorium is lifted. The median equity of a borrower in forbearance is $100,000! Another way to look at it is 96% of homeowners in forbearance have at least 10% equity in their houses. If they have to sell, they will be normal sales.
Based on these numbers the total amount of homes that could go into foreclosure could be about 200,000-300,000 homes nationwide. For comparison, the 2008 crash led to about 10 million foreclosures nationwide. Big difference. And if we divide 300,000 by 50 states, each state could see about 6,000 foreclosures each. However, each state and each market is different so it will not be evenly distributed like this.
Ivy Zelman said, “The likelihood of us having a foreclosure crisis again is about zero percent.” Dr. Lawrence Yun agrees and he expects that the homes will be absorbed quickly and will not lead to any price declines.
Three weeks ago, Lydia did not have any inspections. Then in the past two weeks she has had 15-20 inspections a day! The type of inspection varies. She has done many for iBuyers, tax liens, BPOs, and others.
Servicers are requiring confirmation regarding occupancy. If the property is abandoned the lender is able to foreclose right away, per CFPB’s rules.
For more information on CFPB’s foreclosure ruling visit https://www.consumerfinance.gov/rules-policy/final-rules/protections-for-borrowers-affected-by-covid-19-under-respa/
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.