Delinquency Rate Lowest in COVID Era; but Lingering Risks Remain

Loan performance continued to
improve in January although the number of delinquencies remains significantly elevated
from pre-pandemic levels. Black Knight’s first look at the month’s loan
performance data has both good news and some that is disquieting. The good news
is a 121,000-loan decline in the number of loans that are 30 or more days past
due but not in foreclosure when compared to the prior month. This reduced the national
delinquency rate to 5.85 percent, the first time the rate has been under 6
percent since the pandemic hit
in March 2020.

The number of seriously delinquent loans,
those 90 or more days past due but not in foreclosure, was reduced by 56,000
loans. Black Knight includes loans that are in active forbearance plans in its
delinquency numbers if they are non-current.

However, despite the improvement,
there are still over 3.1 million delinquent loans nationwide
, 1.4 million or 82
percent more than in January of 2020. Of these, slightly more than 2 million
are over 90 days past due. Black Knight says this is five times the
pre-pandemic level.

Because of relief provided by
Congress, there are relatively few loans entering the foreclosure process. There
were 5,900 foreclosure starts in January, 86 percent fewer than a year earlier.
The foreclosure inventory, the number of loans in the process of foreclosure,
at 171,000, is down by 7,000 from December and 75,000 year-over-year.

Black Knight says recent extensions
in forbearance plans terms and of the national foreclosure moratorium have
reduced near-term risk, but at the same time may have the effect of extending
the length of the recovery period.
 
At the current rate of improvement,
1.8 million mortgages will still be seriously delinquent at the end of June
when foreclosure moratoriums on government-backed loans are currently slated to
expire.

It doesn’t appear at present, even
with the elevated levels of serious delinquency, that the country is looking at
a repeat of the last decade’s foreclosure epidemic. Of the five states with the
highest rates of seriously past due loans, Mississippi, Louisiana, Hawaii,
Nevada, and Maryland, none have rates exceeding 6.25 percent rate. At the peak
of the housing crisis all had higher levels of delinquency and Mississippi,
Louisiana, and Nevada had rates in double digits.

Black Knight will provide a more
in-depth review of this data in its monthly Mortgage Monitor report. It will be
published on March 8.

Source: mortgagenewsdaily.com

What Is Redlining?

Homeownership is a major goal for many people. Not only is a house the biggest purchase many will ever make, but owning a home is a way to build and transfer wealth.

While nearly 75% of non-Hispanic white Americans were homeowners in 2020, the homeownership rate was almost 60% for Asian Americans and just over 49% for Hispanic Americans, according to the Census Bureau. Black Americans were the least likely of all minority groups to own a house, at just over 44% in 2020.

Why the stark disparity? The answer, in part, is redlining, a discriminatory housing policy that made it difficult for Black, immigrant and poor families to buy homes for several decades. While redlining was banned more than 50 years ago, its negative effects are still felt today.

Redlining definition

Redlining is a term that describes the denial of mortgage financing to otherwise creditworthy borrowers because of their race or where they want to live.

The term was coined by sociologist John McKnight in the 1960s. It refers to areas marked in red on maps where banks would not lend money, but the discriminatory practice began much earlier.

In the 1930s, as part of the New Deal, the federal government created the Home Owners’ Loan Corporation and the Federal Housing Administration to stabilize the housing industry.

The HOLC was designed to provide low-interest, emergency loans to homeowners in danger of foreclosure, while the FHA replaced high-interest loans of the early 20th century with longer-term, government-insured mortgages at lower interest rates.

To guide lending decisions, the HOLC instituted color-coded “residential security” maps. These maps separated areas the HOLC considered safe for lending from areas that should be avoided. Although the HOLC said the maps would help lenders assess risk and property values, racial biases were clearly at play.

Neighborhoods that were predominantly white were usually colored in green or blue and considered the least risky. It was easier to get home loans in these areas.

Areas with a high number of Black, Jewish and Asian families, which often had older homes or were closer to industrial areas, were typically shaded in red and labeled “hazardous.” Almost no lender would provide mortgages in these areas.

Areas that bordered Black neighborhoods were colored yellow and were also rarely approved for loans.

Effects of redlining

The grading of neighborhoods based on perceived credit risk restricted the ability of Blacks and other minority groups to get affordable loans or even to rent in certain areas.

Exclusion from government lending programs

The FHA, as well as private banks and insurers, used the HOLC’s redlining practices to guide their underwriting decisions.

As a result, it was almost impossible for nonwhite Americans to gain access to the affordable loans offered by agencies like the FHA and Veterans Administration — programs supposedly intended to expand homeownership.

In fact, nonwhite people received just 2% of the $120 billion in housing financed by government agencies between 1934 and 1962, historian George Lipsitz notes in his book “The Possessive Investment in Whiteness.”

Racially restrictive covenants

Racially restrictive covenants are agreements, often included in a property deed, that prevent property owners from selling or leasing to certain racial groups.

These covenants reinforced redlining by prohibiting Blacks and other groups from buying or occupying property in various cities throughout the country.

Although the GI Bill promised low-cost home loans to veterans of World War II, lending discrimination and racially restrictive covenants meant Black soldiers couldn’t buy homes in developing suburbs, for example.

Racially restrictive covenants remain in some real estate deeds, though a 1948 Supreme Court ruling says they aren’t enforceable.

Even so, decades later, Black and Hispanic Vietnam War veterans and their families encountered similar racial discrimination when trying to buy and rent homes in certain areas.

Is redlining illegal?

Angered by the inability of Vietnam War veterans of color to obtain housing, groups like the National Association for the Advancement of Colored People pressured the government to pass the Fair Housing Act of 1968.

As part of the Civil Rights Act, the Fair Housing Act made it illegal for mortgage lenders and landlords to discriminate against someone for their race, color, religion, sex or national origin.

Redlining maps may no longer be in use, but more than 50 years after the law was passed, housing discrimination still exists, says Andre M. Perry, a senior fellow in the Metropolitan Policy Program at the Brookings Institution.

Paired testing studies using equally qualified home seekers of different races have found that some real estate agents discriminate against people of color by not showing them properties in white neighborhoods or showing them fewer homes in general.

Perry also says research he published in 2018 shows homes in Black majority areas are undervalued by $48,000 on average, resulting in $156 billion in cumulative losses.

“Just because a law changed, it doesn’t mean the practices and procedures that still may devalue homes in Black neighborhoods, aren’t still there,” he says. “Ultimately, it’s the reduction of wealth that is the most harmful aspect of redlining.”

How redlining reinforced the racial wealth gap

The racial wealth gap is a term that describes the difference between the median wealth of whites compared with other groups. The median and mean net worth of Black families are less than 15% that of white families, according to Federal Reserve 2019 data.

The disparity exists today because Blacks were locked out of homeownership by redlining and were unable to build generational wealth, says Nikitra Bailey, an executive vice president at the Center for Responsible Lending.

“This persistent gap in homeownership opportunities between white families and families of color literally is rooted in the fact white families got a head start,” Bailey adds.

In fact, the homeownership divide between Blacks and whites is back to where it was in 1890, according to the National Fair Housing Alliance. And the gap is even larger than it was in 1968 when the Fair Housing Act was enacted.

Sheryl Pardo, a spokesperson for the nonprofit research organization Urban Institute, stresses that national, state and local policies are needed to address the homeownership and racial wealth inequities redlining has left behind.

The Urban Institute’s proposals include zoning laws to improve access to affordable housing, counseling before and after purchasing a home to prepare borrowers for the costs of homeownership, the expansion of down payment assistance programs and the development of financial products for homeowners to repair, maintain and improve their homes.

“Homeownership is still the most significant wealth-building tool in this country,” Pardo says. “If you want the Black community to make up that distance, homeownership has to be a key piece of it. It’s almost like you need a shock-and-awe response. It’s not going to happen by tweaking one little lever.”

Source: nerdwallet.com

744: Big City Brokers: What It’s Like Selling Real Estate in NYC with Jay Glazer

Have you ever wondered what it’s like selling real estate in the big city? Jay Glazer runs a highly successful brokerage in New York City and joins us today to discuss what it’s like working as a real estate professional in the nation’s biggest, busiest city. Listen and learn about the distinct challenges agents face in cities like New York, what it takes to qualify buyers for multi-million-dollar apartments, and why Jay wouldn’t want to work anywhere else. Don’t miss it

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Mortgage delinquencies below 6% for first time since March

For the first time since March 2020, the national mortgage delinquency rate fell below 6% to 5.9% in January, according to data from Black Knight on Wednesday.

At the current rate of improvement, the data giant estimates 2.1 million borrowers remain 90 or more days past due though are not yet in foreclosure. While modest mortgage delinquency improvements have occurred for several months, loans considered seriously delinquent are still five times that of pre-pandemic levels.

Thanks to widespread moratoriums, borrowers have managed to avoid eviction and foreclosures for some time now. Foreclosure starts and sales activity managed historic lows in January with starts down 86% year-over-year and sales down more than 95%.

The FHFA most recently extended COVID-19 foreclosure and forbearance moratoriums to March 31, 2021 and the Department of Housing and Urban Development‘s also kicked the foreclosure can further down the road for FHA and USDA loans to June 30, 2021.

While those extensions have reduced short-term foreclosure risk, they are also serving to extend the recovery timeline, Black Knight said. But even with these continuous extensions, Black Knight estimates 1.8 million mortgages will still be seriously delinquent at the end of June when those moratoriums are slated to lift.


From forbearance to post-forbearance: How to make the process effective

To accommodate the large volume of loans still in forbearance, mortgage servicers must have functional, flexible and effective forbearance processes in place. Here are some actionable steps to create that process.

Presented by: FICS

While servicers gear up to handle the million-plus borrowers that will feed through the mortgage delinquency pipeline, recent research from the Urban Institute estimates that a looming foreclosure crisis isn’t actually on the horizon.

A bevy of loss mitigation waterfalls from both the FHA and FHFA allows borrowers not in forbearance programs eligibility for loss mitigation options, including mortgage modifications. Still, not every borrower will qualify for a modification, and some will be forced to downsize or rent, the Urban Institute noted.

Borrowers also have the most equity available to them in history, and those with ample home equity could exit their home, if they needed to, with their credit intact and potentially some cash in hand.

However, approximately 626,000 of the 3.2 million delinquent borrowers have government loans in Ginnie Mae securities. Because of their high loan-to-value ratios at origination, these borrowers are likely to have less home equity.

“Our analysis shows that, even among delinquent borrowers, less than 1 percent have negative equity and 5.5 percent have near-negative equity. For comparison, in the aftermath of the Great Recession,  approximately 30 percent of homes were in negative or near-negative equity, but the number is now 3.6 percent,” Urban Institute report said.

Source: housingwire.com

Forbearance of Foreclosure? How to Keep Your Credit and Homeownership Intact

The following is a guest post by Eric Lindeen, of Anna Buys Houses.

The second quarter of 2020 marked the highest U.S. mortgage delinquency rate (reported as 60-days past due) since 1979. Amidst the chaos of the pandemic, federal and state governments have made efforts to protect against the financial strain U.S. consumers are enduring—including mortgage payment forbearance of foreclosure. 

What Is a Forbearance?

Forbearance is the postponement of mortgage payments, or the lowering of monthly payments for a specified time period; it’s not loan forgiveness. Repayment terms are negotiated between the borrower and lender. Mortgage forbearance is one tool to help protect homeowners from foreclosure due to temporary hardships, such as a job loss, natural disaster, or pandemic. Some homeowners may opt for strategic forbearance, meaning they proactively enter a forbearance agreement just in case they lose their ability to make their mortgage payments.

As of October 25, data from the Mortgage Bankers Association (MBA) reports that approximately 2.9 million U.S. homeowners are currently in forbearance plans. That number represents 5.83% of servicers’ portfolio volume. MBA data also shows that nearly 25% of all homeowners in forbearance plans have continued to make their monthly payment (perhaps an indicator of the use of strategic forbearance).

How Do Forbearance Plans Work?

Mortgage payment forbearance programs have come at a time when many Americans are losing their livelihood and others fear the potential fallout from the health and economic crisis. Not all forbearance plans are created equal. Therefore, it’s critical to understand how different plans are structured to protect your financial health and credit. 

The Coronavirus Aid, Relief and Economic Security (CARES) Act is one measure enacted to provide relief to consumers facing hardships due to the impacts of the coronavirus. One provision of the Act allows mortgage payment forbearance and provides other protections for homeowners with federally or Government Sponsored Enterprise (GSE) backed or funded (FHA, VA, USDA, Fannie Mae, Freddie Mac) mortgage loans. 

If you have a federally or GSE-backed mortgage, no documentation is required to request forbearance, other than an assertion that you are facing a pandemic-related hardship. Borrowers are entitled to an initial forbearance period of up to 180 days. If necessary, an extension of an additional 180 days may be requested. Federally backed mortgages are protected against foreclosure through December 31, 2020. 

Recently, the foreclosure moratorium was extended yet  again to at least March 31, 2021 for GSE-backed loans (Fannie Mae and Freddie Mac). Be sure you understand who owns your loan and the terms of your loan as these deadlines approach. Extensions are likely to continue to help borrowers keep their homes and lenders navigate the constant uncertainty that is 2020.

The CARES Act amended the Fair Credit Reporting Act (FCRA) with a provision that when a lender agrees to forbear an account of a consumer impacted by the pandemic, the consumer complies with the terms of the forbearance. Then, the mortgage issuer must report that account as current to credit reporting agencies.

How Your Credit Factors into Forbearance

On paper, knowing that your credit won’t be affected by forbearance seems like a good deal. There’s an important distinction here. Your loan doesn’t need to be current to qualify for forbearance under the CARES Act. However, any delinquencies on your account prior to entering a forbearance plan will impact your credit report. Make sure that your loan is current, and being reported as current to the credit bureaus, before you agree to a forbearance of foreclosure.

What about Private Mortgages?

Around 30% of single-family mortgages are privately owned. Many private banks and loan servicers have voluntarily implemented relief measures that don’t fall under the same protections of the CARES Act. Terms vary by institution and state of residence. And relief plans may not be structured in the same manner as federally-backed and funded loans. 

For example, borrowers with private loans may be required to pay back all missed payments in a lump sum as soon as the forbearance period ends. Lump sum payments are not required for GSE-backed loans. Additionally, if modifications are made to a privately funded loan, the new terms could impact your credit score depending upon how the lender reports the status of your loan to the credit bureaus.

The good news is that the three major credit bureaus (i.e., Equifax, Experian, and TransUnion) are providing free weekly online credit reports through April 2021. Be sure to check these reports to ensure that the new terms of your loan are being reported as “paying as agreed” and not reported as late. Credit.com also has resources to help check and manage your credit.

It’s also important to understand the terms of your loan. Some homeowners who recently refinanced were asked to sign a form that was quickly described as “new COVID paperwork.” The fine print stated that their new loan was not eligible for forbearance relief measures. 

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Mortgage payment forbearance is one tool that can protect homeowners from defaulting on their loan, damaging their credit, and worst of all, losing their home to foreclosure. Key takeaways include, knowing who owns your loan, who services your loan, and what type of protections are available to provide relief if the current economic crisis is impacting you or you fear that it might. 

There are proactive steps to protect against foreclosure and determine the right path for your personal situation.

Source: credit.com

798: How to Expand Your Team: Real Estate Recruiting 101 with David Hill

Ready to expand your real estate team? Be sure to catch this Real Estate Rockstars with David Hill for a rundown on the recruiting practices that work best with today’s top agents. In addition to sharing how he was able to recruit 159 agents in just one year, David offers valuable tips on retention so that team leaders are able to keep their best producers. Plus, Pat and David discuss the importance of listings, Zillow’s ongoing quest for data, and more.

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Forbearances fall for third week in a row, to 5.22%

The total number of mortgages in forbearance declined seven basis points to 5.22% in the week ending Feb. 14, according to the latest estimate from the Mortgage Bankers Association.

The trade group said 2.6 million homeowners are currently in forbearance plans.

“The share of loans in forbearance has declined for three weeks in a row, with portfolio and PLS loans decreasing the most this week. This decline was due to a sharp increase in borrower exits, particularly for IMB servicers,” said Mike Fratantoni, MBA’s senior vice president and chief economist.

Fannie Mae and Freddie Mac‘s forbearance portfolio continued to express the lowest share of loans, decreasing four basis points to 2.97%. Ginnie Mae‘s share, which include loans backed by the Federal Housing Administration, fell 2 basis points to 7.32%, while the share for portfolio loans and private-label securities (PLS) dropped a full 20 basis points from the prior week, at 8.94%.

The percentage of loans in forbearance for nonbank servicers also dropped 15 basis points to 5.54%, while the percentage of loans for depository servicers decreased 2 basis points to 5.28%.


From forbearance to post-forbearance: How to make the process effective

To accommodate the large volume of loans still in forbearance, mortgage servicers must have functional, flexible and effective processes in place. Here are some actionable steps to create that process.

Presented by: FICS

The MBA’s survey found that of the cumulative exits between June 1, 2020, and Feb. 14, 27.9% of borrowers continued to make their monthly payments during the forbearance period while over 15% of exits represented borrowers who did not make all of their monthly payments and exited forbearance without a loss mitigation plan in place.

Overall, the MBA noted that new forbearance requests are also falling – down six basis points to match a survey low.

“The housing market is quite strong, with home sales, home construction, and home price data all testifying to this strength,” Fratantoni said. “Policymakers and the mortgage industry have helped enable this during the pandemic by providing millions of homeowners support in the form of forbearance.”

In the week prior, forbearance was once again extended by the Biden administration, pushing out forbearance and eviction moratoriums an additional three months, through June 30, 2021. This measure only applies to those with a loan backed by the FHA, though Fannie and Freddie recently extended forbearance requests up to 15 months.

Now, data is showing the affects of long-standing moratoriums. Black Knight’s December mortgage monitor report revealed foreclosure starts hit a record low in 2020, falling by 67% from the year prior as moratoriums and forbearance plans protected homeowners.

Based on the rate of improvement to date, Black Knight estimates there could be more than 2.5 million active forbearance plans remaining at the end of March 2021 when the first wave of plans reaches their 12-month expirations.

For four months now, the forbearance portfolio volume has hovered between 5% and 6% — the longest a percentage range has held since the survey’s origins in May.

Source: housingwire.com

Biden Administration Extends Mortgage Forbearance Again

President Joe Biden has moved to prolong mortgage forbearance for another six months and extend the foreclosure moratorium until June 30. So reports CNBC.

The steps by the Federal Housing Agency will affect 70% of existing single-family home mortgages, according to the White House.

“The steps we are taking today will provide both immediate relief to those in desperate need of assistance and help more homeowners keep their homes and resume their payments when the pandemic subsides,” Matthew Ammon, acting secretary of Department of Housing and Urban Development, said in a press release.

Read the full article from CNBC. 

Source: themortgageleader.com

841: The Past, Present, and Future of Real Estate with Jason Hartman

At just 19 years old, Jason Hartman started his real estate career. By age 24, he was one of RE/MAX’s top agents worldwide. Now, decades later, Jason shares his industry expertise with a network of nationwide investors via podcasts, books, and educational events. On today’s show, Jason looks back on his early days as an agent and discusses what’s changed, what’s stayed the same, and where the industry’s headed. He also explains how to make viable property investments in changing markets by following a set of simple rules. Listen in and learn how to last in this ever-changing industry, how to succeed as a real estate investor, and more.

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