The number of homeowners who are just one or two months behind on their mortgage payments continues to drop below pre-pandemic levels. But the question looming for housing markets is, what will happen to the 2.1 million homeowners who are either in foreclosure, or haven’t made a mortgage payment in more than three months?
The latest data from Black Knight shows that five times as many homeowners were seriously delinquent at the end of March as was the case before the pandemic, meaning they haven’t made a payment for 90 days or more.
Many homeowners who were granted forbearance during the pandemic are scheduled to hit their 18-month program eligibility limit at the end of September. But it’s not looking like there will be a big wave of pandemic-induced foreclosures, at least not on the order of the downturn that followed the 2007-09 recession.
That’s because two-thirds of the 7.1 million homeowners who were granted forbearance during the pandemic have already left, and most of this “bellwether” group have either resumed payment on their loans or paid them off.
Black Knight classified about 160,000 homeowners who had exited forbearance as being at “high risk” of foreclosure as of April 20, because they are not enrolled in a loss mitigation plan and remain delinquent. Among that group, it’s worth nothing that 100,000 were already delinquent heading into the pandemic.
Source: Black Knight Mortgage Monitor.
“Bellwether forbearances – homeowners who entered into forbearance early in the pandemic and who will determine the impact of the initial wave of 18-month expirations – have made up a significant share of the improvement, a good sign for the overall recovery,” Black Knight’s latest Mortgage Monitor report concludes.
The number of foreclosure starts was up 28 percent in March, to 5,000. But the total number of homes in foreclosure fell to another record low, 162,329, as forbearance programs and foreclosure moratoriums continue to provide protection for homeowners.
For context, at the height of the housing downturn that followed the Great Recession, Black Knight counted 292,308 foreclosure starts in January 2010 alone. The total number of homes in foreclosure during the downturn peaked a year later at 2.25 million, in January 2011.
Last month, just 217,000 homeowners who had been current on their mortgage became newly delinquent — the lowest of any month on record dating back to the turn of the century. That, combined with a spike in “cures” — 671,000 homeowners who had been delinquent got back on track making their payments — saw the national delinquency rate nearly a full percentage point in March, to 5.02 percent.
“Not only did March see the largest single-month improvement in delinquencies in 11 years, but all indications suggest more is yet to come,” said Black Knight’s Ben Graboske in a statement.
Graboske said other key metrics pointing to a “robust recovery under way” include the fact that mortgage delinquencies usually tend to climb in April. But that’s not been the case this year. As of April 23, 91.6 percent of mortgage holders were current on their monthly payments, up from 91 percent in March and the largest share for any month during the pandemic.
“That said, while overall sentiment for an economic recovery in 2021 remains robust, mortgage performance is expected to run into seasonal headwinds for most of the remainder of the year, which could marginally dampen overall improvement rates. Black Knight will continue to monitor the situation as we move forward,” Graboske said.
With mortgage rates easing in recent weeks, 3.4 million homeowners regained the incentive to refinance. That favorable trend in rates also helped make homes more affordable.