Delinquencies

The market could find out next year how well foreclosure prevention innovations and home equity protect borrowers from growing strains on affordability.

The withdrawal of pandemic housing relief and high home prices have heightened consumer strain, according to nonprofit Money Management International.

Over 111,000 distressed mortgage holders opted into a loan modification program during the COVID-19 pandemic by using a designated digital platform or app, according to Black Knight.

Current forbearance volumes have returned to pre-COVID levels among loans held at Fannie Mae and Freddie Mac, a Fed study found.

The 51 basis point increase was inevitable after the late payment rate reached a record low in the third quarter, the Mortgage Bankers Association said.

Foreclosure starts also increased by over 19% between October and November but remain below pre-pandemic levels.

But the likelihood of a recession and higher unemployment should drive the rate higher in the future, the Mortgage Bankers Association said.

Recent reports highlight the question of how much wage growth can do to sustain loan performance as pandemic relief gets rolled back, consumer costs rise and the housing market cools.

The rate at which borrowers went past due on their home loans showed near-term improvement in July, according to Black Knight, but servicers fear those who still have forborne payments won’t recover.

Forborne mortgages stemming from the coronavirus outbreak reached their lowest level since late March 2020, according to the Mortgage Bankers Association.

Late payments on office loans have trended upward recently, but longer lease periods may mitigate the potential for distress in that sector, the Mortgage Bankers Association said.

The relatively low share of borrowers who were distressed in June adds to signs that the offramp from government relief measures may not lead to an overwhelming wave of foreclosures.

Consumers are booking rooms at levels not seen since early 2020 and loan delinquencies have fallen sharply as a result. Still, business travel remains sluggish and new COVID variants are spreading, threatening the hotel industry’s recovery.

Identifying where payment stress is concentrated could help mortgage servicers and federal policymakers prepare for the broader range of loan workouts that will resume this summer.

It will be several years before business and group travel return to normal levels, according to an estimate from the American Hotel & Lodging Association.

Rebounding employment brought total forborne mortgages under 2 million, according to the Mortgage Bankers Association.

Private mortgage insurers can continue to hold less capital for forborne delinquent loans, which helps them potentially upstream payments to parent companies in the third and fourth quarters.

The numbers, which include payments suspended for pandemic-related hardships, could be a consideration in the possible further extension of moratoria federal regulators are close to making a call on.

The strength of the housing market helped to increase forbearance exits while minimizing new requests, according to the Mortgage Bankers Association.

About 20% of the pandemic-related delinquent borrowers are up for review by the end of June, which could lead to vast improvement or deeper financial strife, according to Black Knight.