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Delinquencies Above Pre-Pandemic Levels Predicted Into 2022

foreclosureMortgage delinquencies could remain above pre-pandemic levels until 2022, according to a new forecast published in the Black Knight Mortgage Monitor Report.

Black Knight is also predicting more than 1 million excess delinquencies could occur in March 2021 when the first wave of forbearances reaches the 12-month expiration period. The Jacksonville, Florida-based company also observed that the mortgage market has seen five months of continual increases in serious delinquencies, albeit at a slower pace during August, compared with the three-to four-month peak typically seen in 90-day delinquencies following natural disasters.

“For the first several months of the pandemic, the performance impact of COVID tracked relatively closely to that of major hurricanes,” said Black Knight Data & Analytics President Ben Graboske. “Those trends have since begun to diverge, however, and looking at the three-month average rate of improvement since May’s peak in mortgage delinquencies suggests a longer recovery timeline. At the current rate of improvement, delinquencies would remain above pre-pandemic levels until March 2022.”

During August, Black Knight determined that 2.4 million homeowners who received coronavirus-related forbearance plans have since exited those plans, with most of the borrowers currently performing. This represents 41% of all homeowners who have been in forbearance plans.

“Of those no longer in forbearance but still past due, the vast majority–some 267,000–are in active loss mitigation programs with their lenders,” Graboske said. “Just 54,000 loans at present represent significant risk–having left forbearance, are past due and not engaged in loss mitigation efforts.”

Graboske also pointed out that record levels of equity helped to mitigate foreclosure risk. Black Rock’s latest data estimated that nearly 45 million homeowners have tappable equity in their homes, the largest volume ever. The average level stands at nearly $125,000, a record-breaking increase of more than $3,200 from one year ago.

“Seventy percent of those were already delinquent in February, before COVID became a factor,” he continued. “Furthermore, American homeowners now have the most equity available to them in history. Of those in forbearance, just 9% have less than 10% equity in their homes, which offers both borrowers and lenders multiple options in lieu of foreclosure.”

About Author: Phil Hall

Phil Hall is a former United Nations-based reporter for Fairchild Broadcast News, the author of nine books, the host of the award-winning SoundCloud podcast "The Online Movie Show," co-host of the award-winning WAPJ-FM talk show "Nutmeg Chatter" and a writer with credits in The New York Times, New York Daily News, Hartford Courant, Wired, The Hill's Congress Blog and Profit Confidential. His real estate finance writing has been published in the ABA Banking Journal, Secondary Marketing Executive, Servicing Management, MortgageOrb, Progress in Lending, National Mortgage Professional, Mortgage Professional America, Canadian Mortgage Professional, Mortgage Professional News, Mortgage Broker News and HousingWire.
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