The number of coronavirus-related leniency-related mortgages spiked towards the end of the month and rose only for the third time in consecutive weeks since peaking in May, according to Black Knight.
Forbearances were up 20,000 from the previous week, increasing to a total of 2.764 million plans on Jan. 26. Forborne borrowers account for 5.2% of all mortgages and a combined unpaid principal of $ 551 billion, up from $ 548 billion for the week.
Forbearance payments are rising at a time when a higher proportion of such loans are tied to truly distressed borrowers compared to the start of the pandemic, when many borrowers viewed COVID forbearance only as a precaution.
"Early on, about 50% of lenient people continued to make mortgage payments," said Andy Walden, Black Knight economist and director of market research, in an interview. “Now that we've got through December, it's only 12%. So the vast majority of these forbearance homeowners are in arrears. "
Among loan types, only those backed by Fannie Mae and Freddie Mac fell week by week, falling 4,000 to a total of 925,000. Government-supported mortgages – FHA and VA – rose 9,000 to a total of 1.149 million. Securitized portfolio and private label loans that are not protected by the CARES Act rose again by 15,000 to a total of 690,000.
"The most important date is late March as that is when the first wave of forbearance plans hit their 12-month expiration," said Walden, who estimated 600,000 to 700,000 homeowners will reach this expiry. "Then we'll really understand how this after-indulgence waterfall works, what proportion of these borrowers are willing to re-service through a delay or reinstatement through a repayment plan for changes, and what additional programs are needed to help." "
Mortgage service providers have to make prepayments of $ 3.4 billion in principal and interest payments and $ 1.2 billion in taxes and insurance per month, according to Black Knights' analysis. These sums were broken down into estimates of $ 1 billion and $ 400 million for government-sponsored corporate loans, $ 1 billion and $ 400 million for FHA and VA, and $ 1.2 billion and $ 400 million for private label.
Further extensions are expected while the current leniency program expires on March 31st. The latest $ 1.9 trillion stimulus plan proposed by the Biden administration would extend forbearance and foreclosure and eviction bans through September 30th. According to Cam Melchiorre, while the extensions must be necessary to serve borrowers in need, they also need to consider servicers, President and Director of Regulatory Compliance at IndiSoft.
“I don't think we should overlook the financial impact of continued forbearance and forbearance agreements on the servicer. That could shut down a servicer overnight for lack of capital and I hope lawmakers are aware of that, ”Melchiorre said. "Yes, the consumer is at the forefront of getting help, but you don't want to create systemic problems for the industry that is trying to support everyone."