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Mortgage Delinquencies Rise 20% in May

About half of COVID-19-related forbearance plans expired last month, and one-fourth are set to expire this month, leaving mortgage loan servicers with the task of reviewing more than a couple of million loans for forbearance extensions or payment eligibility.

With 4.1 million homeowners past due on their mortgage loans, the national delinquency rate is now 7.76%, according to the latest Mortgage Monitor from Black Knight.

Delinquencies jumped 20% and 1.3 percentage points higher in May, which Black Knight noted, “would have been the worst single month ever recorded if it weren’t for the 3.1 percentage point increase the month prior.”

Today’s delinquency rate is up 4.5 percentage points from the 3.2% record low recorded back in January.

While servicers have a major task now in assessing loans in forbearance, Black Knight said, “this will also provide an early look at roll rates of loans in active forbearance,” and the insight from this summer “can be used for downstream modeling on performance and the residual volume of loans in active forbearance in coming months.”

The total number of loans that are either past due or in foreclosure is 4.3 million, up from 2.3 million at the end of March, according to Black Knight. However, the foreclosure rate is down by 5.8%.

Of those 4.3 million homeowners, 3 million have become delinquent over the past three months, while just 1.3 million were delinquent in February, prior to the COVID-19 pandemic hitting the nation.

About 90% of mortgages that have become past due since the start of the pandemic in the United States are in forbearance with their servicer. About 40% of loans that were delinquent before the pandemic have also entered a forbearance agreement.

The share of mortgage payments received through late-June is similar or a little higher than the rate from May, according to Black Knight’s McDash Flash Payment Tracker.

“This suggests we could see a leveling off, or even improvement in mortgage delinquencies when June’s month-end mortgage performance numbers are reported in mid-July,” Black Knight stated in its Mortgage Monitor.

However, with COVID-19 cases on the rise in some areas, there is still uncertainty regarding delinquencies.

Black Knight detected some seemingly good news regarding home purchase loans. In-person property showings were down 63% over the year as of mid-April, but they have picked up since. At the start of this month, showings were 15.7% higher than they were a year ago, perhaps signaling that some missed sales opportunities from spring will be made up this summer.

Black Knight also detected purchase lock rate activity at its highest level all year in the third week of June. Purchase lock activity for the first three weeks of June was 60% higher than the previous month and 21% higher than a year ago.

Also notable, the record low mortgage rates of late put a significant number of homeowners in a position to potentially benefit from a refinance. According to the Mortgage Monitor, 13.6 million homeowners could save an average of $238 per month with a refinance based on May’s average rates.

About Author: Krista F. Brock

Krista Franks Brock is a professional writer and editor who has covered the mortgage banking and default servicing sectors since 2011. Previously, she served as managing editor of DS News and Southern Distinction, a regional lifestyle publication. Her work has appeared in a variety of print and online publications, including Consumers Digest, Dallas Style and Design, DS News and DSNews.com, MReport and theMReport.com. She holds degrees in journalism and art from the University of Georgia.
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