The national mortgage delinquency rate improved by almost an entire percentage point, month-over-month, according to data from March collected by analysts at Black Knight. Driving the plunging rate, researchers deduce, are both time of year and brightening economy and fiscal outlook. Indeed, Fannie Mae's economists earlier this week said the previously forecast economic ramp-up is underway [1].
Specifically, the national delinquency rate fell to 5.02% from February's 6.00%, which is a 16.4% decline.
March typically is a month of declining delinquencies due to tax returns and other seasonal funds being used by homeowners to pay down past-due mortgage debt, Black Knight reports. They say that over the past 20 years, delinquencies have fallen by nearly 10% on average in March.
"Despite March’s strong performance, some 1.9 million mortgage-holders— including those in active forbearance—are at least 90 days past due on payments. There are 1.5 million more such serious delinquencies than at the onset of the pandemic, nearly five times pre-pandemic levels."
Still, foreclosures remain at record lows because the nation and local municipalities alike have implemented and continually extended foreclosure bans and forbearance allowances.
Actions taken by the government to offset record delinquencies have been beneficial to U.S. homeowners, but as deadlines and a more typical borrower behavior ensue following a vaccine rollout, the default servicing side of the industry may be hit with volumes of daunting proportions.
In a recent DS News webinar, Flagstar's Courtney Thompson pointed out that a whole population new to the delinquency side, was born of the COVID-19 fallout, and she said the industry needed to find a way to handle this emerging market.
“We had a whole new group of humans that were in default and entered into the delinquency process,” Thompson said at the time. “This was not your traditional default consumer … these are consumers who are not used to navigating the different channels of default, whether it's forbearance, loss mitigation, or a repayment plan," Thus, our panelists agreed [2] that communication between borrower and lender is key.
Also, the analysts at Black Knight report that, as interest rates are expected to rise, prepayments on mortgage loans increased by 17% in March to the highest level in more than 17 years. That's reportedly driven by a seasonal rise in home sales alongside a rise in refinance activity locked in before rate increases.