Scholar mortgage forgiveness’ increase to mortgage efficiency could also be small

Mr. Cooper ran the numbers on student loan forgiveness and found some potential for it to improve home loan performance, but not enough to move the needle, executives told investors at the Barclays Financial Services Conference this week.

Troubles with education debt have been contributing to the mortgage delinquency rate, but not to any great degree, Chairman and CEO Jay Bray said.

“I think if you looked at our portfolio, about 16% of our customers have student loan debt and …30% of those are more delinquent than the average portfolio, but [mortgage] delinquencies are so low that it’s kind of insignificant,” he said.

Of that 16%, an estimated 30% to 40% will be relieved of their entire student debt burden.

When asked about the potential impact of that forgiveness on mortgage performance, Bray said, “I think for us, it’s going to be pretty minimal at the end of the day.”

He added that he thought Mr. Cooper’s numbers would generally reflect the broader industry’s experience.

“We think we are probably representative since we are one of the largest servicers in the country or among the largest servicers,” Bray said.

Borrowers generally prioritize mortgage debt over other obligations in most markets. One  exception would be a period like the Great Recession, when underwriting was loose, house prices depreciated and some loans outweighed the values of the homes securing them.

To date, although housing prices have cooled a little and late mortgage payments have ticked up slightly month-over-month, home equity levels have remained historically high, and underwriting standards have been tight.

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