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Measuring the Success of Borrower Assistance Programs

According to Fitch Ratings’ 4Q22 U.S. RMBS Servicer Metric Report, mortgage loan servicers continue to work with struggling homeowners to avoid loan default, as delinquent loans remained flat from 3Q22. Fitch’s U.S. RMBS Servicer Metric Report is published quarterly with the most recent four quarters of servicer performance data included. The report provides transparency into servicing industry trends in the bank and non-bank sectors. It also allows users to compare data metrics across servicers, revealing strengths and weaknesses in performance during this critical time in the industry.

Real estate-owned (REO) inventory trends during the last four quarters reflected a continuing decrease in highly-aged inventory (greater than 360 days), as mortgage servicers continue to work through their post-pandemic REO inventory. However, mortgage servicers reported a 5% increase in new REO properties in the one- to 179-day category, reflecting the resumption of active foreclosure filings that commenced in the fourth quarter of 2022. The inflow of new REO properties is 60% less than the previous quarter’s reported data.

“While loan portfolio delinquencies for Fitch-rated bank and non-bank servicers were flat or improved for the fourth consecutive quarter, the impact of borrower assistance programs and successful workout strategies is holding new foreclosure filings and, consequently, new REO properties, at a minimum,” said Fitch Ratings Director Richard Koch.

Fitch Ratings’ 4Q22 U.S. RMBS Servicer Metric Report found that bankruptcy and foreclosure filings and 60- to 90-plus-day delinquencies showed no significant change quarter-over-quarter for bank and non-bank servicers, although bank servicers showed a 1% decline from last quarter’s 2% reported new foreclosure filings.

Bank and non-bank servicers reported a continuing decrease in loan modifications quarter-over-quarter to 25% from 31%, and 16.5% from 17%, respectively.

Active forbearance plans for banks and non-banks reflected a significant decrease quarter-over quarter to 11.50% from 37%, and 16.50% from 42%, respectively. The significant decline in forbearance exits may be attributed to the availability of borrower assistance programs including the U.S. Treasury’s Homeowner Assistance Fund (HAF) program and options offered by mortgage servicers, including short sales, deferments, and deed-in-lieu of foreclosure.

Borrower assistance programs account for 44% of monthly loss mitigation workout volume for bank servicers, an increase from 2.39% over the previous quarter, while non-bank servicers reported a 9% decline from the previous quarter to 20.55%.

Fitch-rated servicers reported other key performance trends:

  • Bank servicers reported a minimal decrease in full-time employees for the third consecutive quarter, with an average reduction of 4% from the previous quarter.
  • Non-bank servicers downsized about 6% on average from the previous quarter.

The most recent foreclosure analysis from ATTOM tells a slightly different story than the data analyzed to close out Q4 of 2022. Continued inflationary concerns and a rise in overall prices has somewhat shifted the nation's foreclosure landscape, as May’s U.S. Foreclosure Market Report published by ATTOM Data, found a total of 35,196 properties with a foreclosure filing against them, up 7% from April 2023, and 14% year-over-year. Nationally, one in every 3,967 had a foreclosure filing against it. Regionally, the highest rates were found in Illinois, with one in every 2,144 housing units with a foreclosure filing; Maryland, where one in every 2,203 housing units reported a foreclosure filing; New Jersey, where one in every 2,257 housing units reported a foreclosure filing; Florida, where one in every 2,470 housing units reported a foreclosure filing; and Ohio, where one in every 2,478 housing units reported a foreclosure filing.

About Author: Eric C. Peck

Eric C. Peck has 20-plus years’ experience covering the mortgage industry, he most recently served as Editor-in-Chief for The Mortgage Press and National Mortgage Professional Magazine. Peck graduated from the New York Institute of Technology where he received his B.A. in Communication Arts/Media. After graduating, he began his professional career with Videography Magazine before landing in the mortgage space. Peck has edited three published books and has served as Copy Editor for Entrepreneur.com.

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