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Delinquency Report Reflects ‘Critical Situation’

borrower outreachThe latest First Look mortgage loan performance data report from Black Knight Inc. on the state of mortgage delinquencies offered glimmers of hope mixed with statistics that point to continued problems across the housing market.

First, the good news: mortgage delinquencies in November totaled 6.33%, down from 6.44% in October. November marked the sixth consecutive month of improvements in mortgage delinquency rates. And the national delinquency rate fell 1.5 percentage points from its peak of 7.8% in May.

Furthermore, November saw a total of 4,400 foreclosure starts and 176,000 loans in active foreclosure—both levels are the lowest that Black Knight reported began it began tracking these in 2000. There was also a positive breakthrough with early-stage delinquencies, which have fallen below pre-pandemic levels.

However, not all of the news is copacetic. Black Knight also noted that the national delinquency rate is a full three percentage points above pre-pandemic levels while seriously past-due mortgages remain 1.8 million above pre-pandemic levels.

Black Knight also noted that prepayments fell 11% from October’s 16-year high, adding that prepay activity will likely remain elevated for the near future due to record-low interest rates and a refinance incentive at an all-time high.

Michael Sklarz, who leads Black Knight Data and Analytics' Collateral Analytics team, predicted that many homeowners facing the expiration of their forbearance plans under the CARES Act might put their properties up for sale rather than face mortgage delinquency.

“There are millions of homeowners currently in forbearance across the country who will lose those protections throughout next year and—depending upon their ability to return to performing status—who may find themselves facing foreclosure,” Sklarz wrote on the Black Knight blog. “This is of course assuming a Biden administration doesn’t extend the moratoriums currently in place. Regardless, we may very well see a meaningful increase in the number of homes listed for sale as these borrowers choose to sell at what is arguably an intermediate top in the market and downsize to more affordable homes rather than face foreclosure.”

Sklarz added that this scenario, which would suddenly pump housing inventory levels higher, could result in home prices going down with equal speed.

“Combined with overbuilding of new housing units, this could create a situation not unlike that seen following the housing crash in 2007-2008, which took many years to resolve itself, and where we saw inland U.S. real estate market prices move sideways for an extended period of time,” he said. “While there are still too many uncertain factors at play to outright declare a real estate bubble, we do see the potential for correction in markets both inland and coastal. It’s a critical situation that will require highly accurate data and experienced insight to analyze in the coming months.”

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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