Distressed

An economic rebound, stimulus payments and COVID-19 vaccinations contributed to new delinquencies dropping to an all-time monthly low with more recovery ahead, according to Black Knight.

While government protections currently shield most borrowers and delay process timelines, a growing backlog is likely to hit some areas of the country worse than others.

Thanks to a series of government measures, the pandemic did not cause the massive wave of distressed debt flooding the market that many expected, but certain property types remain vulnerable.

Though the government-sponsored enterprises have some of the lowest forbearance rates in the market, they expect to contend with a significant population of borrowers who face steep financial setbacks after the pandemic ends.

Also, even with bans in place, the total number of filings keeps inching up due to actions taken on vacant properties.

While the overall delinquency rate decreased for the fifth straight month, states with unemployment rates that were double and triple the national average had the most overdue loans, a CoreLogic report found.

The stabilizing economy drove one of the biggest mortgage recoveries on record, according to the Mortgage Bankers Association.

Servicers of loans not related to the government most often capitalized missed payments and converted them into a deferred, non-amortizing balance, said Vadim Verkhoglyad of dv01.

However, the decline in Black Knight’s numbers may stem from a previous deadline that policymakers have since extended.

Inventories should keep shrinking, which is likely to drive higher returns on equity and reduce their loss ratios, a BTIG report said.