The entire world is feeling the brunt of the COVID-10 pandemic, and with many out of work, the mortgage and housing markets are no exception. In a recent webinar, Five Star Global President and CEO Ed Delgado delivered a "state of the industry" update on sales and home price trends, forbearances, and the REO market.
Using data from the Bureau of Labor Statistics, Delgado noted that, due to recent record high unemployment levels, 12 years of job recovery had been “wiped out.” However, he added that things could have been even worse if not for the strong economy in place at the beginning of the crisis. Moving forward, Delgado explained that he is anticipating a "W-shaped" recovery, aka a "double-dip recession" with two downturns leading to final recovery.
"It's not going to be the brief blip on the screen," Delgado said. "I don't think we're going to be out of this in six months. I think it will be closer to 12."
That anticipated slow recovery will extend to the mortgage servicing market as well, Delgado explained.
According to Black Knight, 3.6 million homeowners were past due on their mortgage at the end of April, up by 1.6 million month-over-month. Approximately 4.5 million homeowners were in forbearance plans as of May 19, representing 19% of all mortgages.
While some servicers may be receiving liquidity assistance due to the loss from forbearances, nonbanks are still facing shortfalls related to these plans. Ginnie Mae responded by approving a servicer liquidity facility, and the FHFA has approved the purchase of previously ineligible mortgages in forbearance by Fannie Mae and Freddie Mac.
The housing market is expected to be further complicated by the hurricane/wildfire season overlapping with COVID-19. Delgado questioned how the industry playbook for natural disaster response will be impacted by social distancing and the work-from-home environment.
"We haven't felt the full force of the impact COVID-19 has had on the economy, and the recovery will be protracted," Delgado stated.