Mortgage delinquencies set a new record in March

What a difference a year can make. At this time in 2020, mortgage servicers prepared for an incoming tidal wave of distress as coronavirus unemployment and uncertainty mounted. Now, with the economy rebounding, delinquency performance did a complete 180 with the “largest single month improvement” in 11 years, according to Black Knight.

The latest Mortgage Monitor showed 217,000 homeowners became delinquent on their home loans in March, an all-time monthly low and down from 429,000 in February. The overall delinquency rate fell to 5.02% from 6% month-over-month but rose from 3.39% year-over-year — before the pandemic’s financial impact truly set in.

“The distribution of 159 million stimulus payments totaling more than $376 billion, broader economic improvement leading to nearly a million new jobs and 1.2 million forbearance plans reviewed for extension or removal resulted in an 11% decline in plan volumes in the last 30 days,” Ben Graboske, president of data and analytics at Black Knight, said in a press release.

Prepayment activity spiked to a 17-year high as mortgage rates remained favorable for borrowers. The activity jumped 17.3% month-over-month to a rate of 91%. While delinquencies normally increase seasonally into the spring, data from April points to further improvement ahead. Numbers through April 23 showed a 91.6% prepayment rate. Additionally, overall loan performance from the 7.1 million borrowers who came under COVID-19 forbearance plans has been generally strong, Graboske added.

Meanwhile, 90-day delinquencies declined to 1.92 million from February’s 2.07 million. However, the number is five times higher than its pre-pandemic level due to the swaths of consumers still facing hardships, borrowers choosing to remain under forbearance protection and a number of borrowers who remain under protection because they can’t be reached.

Foreclosure starts surged 28.2% month-over-month to 4,961 from 3,887 while active foreclosures dropped to another record low of 162,329 from 167,944 in February. March 2020 starts totaled 27,585 and active plans hit 220,271. However, policies around foreclosure continue to be fluid, as governing agencies look to align and figure out the best plan forward. Housing markets along the East Coast and pockets of the Midwest currently face the most vulnerability to foreclosures.