Foreclosure prevention actions are mounting, according to the Federal Housing Finance Agency.
A total of 107,609 were completed by the Enterprises in November—with the total hitting 5,499,159 since September 2008. It marked the start of the conservatorships. Meantime, permanent loan modifications have accounted for about 44% of these actions.
In November, there were 2,624 permanent loan modification since the conservatorships began in September 2008, that brought the total to 2,437,133.
The same month, 14% of modifications were those with principal forbearance, whose modifications with extend-term only accounted for just 68% of all loan modifications.
There was a bounce from 83,404 in October to 57,133 in November in the number of borrowers on the receiving end of payment deferrals after wrapping up a COVID-19 related forbearance plan.
There was only a modest uptick on initiated forbearance plans in November, from 58,516 in October to 59,203. Conversely, the total number of loans dipped from 922,589 at the end of October to 841,977 at the end of November. That was around 2.90% of the total loans serviced, and 69% of the total delinquent loans.
As mortgage rates continued to fall through October, last November, total refinance volume parachuted, sustaining a record-breaking pace.
There was a modest jump, to 1.02%, in the 30-59 days delinquency rate. Meanwhile, the serious delinquency rate spiraled from 2.99% at the end of October to 2.88% as November wound down.
Following a similar course, there was a trail off of 19% to 602 in third-party foreclosure sales. In November, foreclosure starts descended 38% to 1,540 in November.
The million-dollar questions that everyone in the industry is asking right now are: “What are foreclosures going to look like once the foreclosure moratoria and forbearance programs come to end? And will we see all those borrowers in forbearance end up in default?”
The short answer is “there probably won’t be a foreclosure tsunami.” But mortgage servicers and other default servicing professionals should prepare themselves nonetheless. Some industry analysts have predicted a huge wave of foreclosures once the forbearance program comes to an end. Popular opinion at the start of the pandemic was if there were 4 million people in forbearance, we’d ultimately have 4 million people in foreclosure. But the way the program has worked so far suggests that’s simply not the case. The Federal Reserve Bank of St. Louis estimated that 500,000 borrowers avoided foreclosure during the fourth quarter of 2020 due to coordinated relief efforts, which makes the CARES Act forbearance program is one of the best examples we’ve ever seen of the government and the industry working hand-in-hand to accomplish such a positive outcome.
The program has done exactly what it was supposed to do: allowed millions of people to get through the pandemic and recession without losing their homes while giving them time to get back on their feet financially once COVID-19 is under control. But there are still millions of borrowers in the forbearance program. What will happen to them as they exit, and how will the industry handle the high volume of borrower requests for repayment plans?