Disruption in Property Tax Revenue From Forbearance Plans

In a new report, CoreLogic measures how forbearances will impact property tax revenue. Acording to CoreLogic’s data, 61% of expected escrowed property tax payments will be advanced by bank servicers, while 39% will be advanced by non-bank servicers.

Additionally, the cumulative monthly cash flows expected from non-bank servicer escrow account disbursements builds from $3.39B in March, reaching double-digits ($11.56B) in July, and capping out at $35.39B in December. With respect to bank servicer escrow account disbursements, they also build from $4.63B in March, reaching double-digits ($12.56B) earlier in May, and capping out at $55.96B in December. In total, cumulative monthly cash flows from servicer escrow account disbursements is forecast to be $91.36B for the period of March to December of this year.

With the financial stress to homeowners mounting, some of the top 20 (and many other) MSAs/Counties are already making contingency plans. For example, while Los Angeles County has not extended their ELD for property tax payments, they have announced that delinquent taxpayers can apply for a workout plan for any missed payments. Philadelphia County has moved their ELD to July to give taxpayers extra time to make their payments (i.e., forbearance for property tax bills). Likewise, King County (Seattle) has extended the deadline for non-escrow account borrowers from April to June. Finally, San Francisco County has moved their ELD to May to provide their taxpayers some relief. We expect this type of property tax loss mitigation to expand over the coming weeks. These mitigation efforts suggest that MSAs/counties are aware of the risk of a drop off in property tax revenue.

“Over time we will be able to measure actual material impacts (if any) to municipal property tax payments stemming from possible disruptions or delays by financially stressed mortgage servicers or delinquent non-escrow account mortgage borrowers.,” CoreLogic said. “Regulators will continue to monitor mortgage servicers’ ability to fulfill their obligations to advance property tax payments that are a source of revenue for municipalities.”