AZ Forbearance Update 8/11/2021

In this 15 minute video, Lydia Wietsma and I discuss the latest in policy, forbearance, foreclosures, and inspections.

Policy:

There is a lot of confusion with all of the info coming out of Washington DC. There are proposals, bills, executive orders, extensions, approvals, and appointments announced every day. The Biden administration is proposing a lot of bills that impact housing.

Here is a brief update on several of the policies coming out of DC:

  • The $1 trillion proposed infrastructure bill passed the Senate and is now in the House for negotiations.
  • A new $3.5 trillion social infrastructure bill has been proposed in the Senate which includes down payment assistance options along with other housing aid.
  • Eviction ban was extended through 10/3. This extension has created quite a buzz among the real estate industry. I expect many more lawsuits in the coming weeks.

Lifted Foreclosure Ban:

This did not create a foreclosure frenzy as the CFPB implemented a strict foreclosure process for lenders and servicers. It is likely that we will not see many foreclosures until later in the year after borrowers have exhausted their loss mitigation options.

Keep in mind that in any year there are foreclosures. The ban that lasted nearly 18 months created a backlog that will have to be worked through. From 2017-2019 there was an average of just over 290,000 foreclosures nationwide which gives us a shortage of about 432,000 foreclosures.

Given that nationally homes have appreciated about 17% year over year and here locally about 27% year over year, most borrowers in foreclosure will be able to do a normal sale rather than having to go through foreclosure.

Nationwide, it is estimated that about 4% of borrowers are upside down on their homes by 25% or more. This number has decreased from 6% last year.

The report went on to say, “Equity gains in Arizona were particularly extreme. In the first quarter of the year, 16 percent of mortgaged homes in this state were considered equity-rich by Attom’s definition. In the second quarter of 2021, that number rose to nearly 40 percent.”

Forbearance Numbers:

The total number of loans in forbearance continues to decline. We are down to 3.4% of loans which is about 1.7 million borrowers.

Forbearance by Stage:

  • 9.7% of total loans in forbearance are in the initial forbearance plan stage.
  • 82.9% are in a forbearance plan extension.
  • 7.4% are forbearance re-entries.

Forbearance Exits from June 1, 2020 through August 1, 2021

43.7% of borrowers continued making their payments (22.9%), got caught up upon exiting (13.3%), or paid off the loan with a refinance or sale (7.5%).

The percentage of exits for the group to be most concerned about, borrowers who exited their forbearance plan still behind and without a loss mitigation plan in place remained flat at 15.7%.

Future Forbearance Exits:

According to Black Knight data services, next month is anticipated to have the largest number of forbearance plan exits this year.

Missed Payments:

While mortgage delinquencies are easier to track, missed rental payments are not. Based on my research, I think the MBA’s recent update stating that Q2 2021 saw a big improvement in missed housing payments and the total number for both borrowers and renters is below 5 million nationwide is fairly accurate. The data shows that there are about 2.86 million rental households behind on their payments and 2.19 million borrowers behind on their mortgage payments.

Servicers & Inspections:

Inspections are way up. Many more for corporate buyers, not just iBuyers but also buy and rent companies also. The servicers have gone quiet on the future of foreclosures but continue to prepare for the coming months of uncertainty.

Be mindful of the information out there. Be sure that it is current and from a reputable source. And remind borrowers and renters there are still options available. Discuss exit strategies.

Options:

Forbearance and foreclosure assistance: https://www.consumerfinance.gov/coronavirus/mortgage-and-housing-assistance/help-for-homeowners/avoid-foreclosure/

AZ Eviction Help: https://azevictionhelp.org/

Published by Sarah Perkins

Sarah has been with Lawyers Title of Arizona since 2004. As an award-winning sales executive, Sarah's role is to bring transactions to Lawyers Title. To do this, she focuses on supporting her clients and helping them navigate the ever-changing real estate space through thorough research and understanding of current trends impacting today's home buyers and sellers.

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