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Loan Mods and Liquidation Decline

loanTotal loan modifications equaled total liquidations in June, according to a snapshot of the housing market published by the Urban Institute’s Housing Finance Policy Center.

Citing a report by Hope Now, the center’s Monthly Chartbook indicated that around 8.3 million borrowers had received a loan modification since the third quarter of 2007 compared with around 8.6 million liquidations in the same period. “Modifications and liquidations have slowed significantly over the past few years,” the report said. “In Q1 2018, there were just 59,537 proprietary modifications and 56,137 liquidations.”

Looking at the numbers for negative equity and serious delinquency during the period, the report indicated that properties in negative equity as a share of all residential properties with a mortgage edged down to 4.71 percent in the first quarter of 2018. Residential properties that were near negative equity comprised another 1.18 percent of the total residential properties with a mortgage. This, Urban Institute said, was because of the continuing appreciation of home prices.

Ninety-day delinquencies, which had seen a sharp rise after last year’s hurricanes also declined from 1.72 percent to 1.45 percent in the first quarter of 2018. The percentage of loans in foreclosure also continued to decline to 1.16 percent, the report said. Combined delinquencies totaled 2.61 percent in Q1 2018, down from 2.91 percent in the last quarter of 2017 and 2.76 percent during the same period a year ago.

The report also took a close look at housing affordability with a particular focus on the first-time homebuyer (FTHB).

“As of April 2018, the share of median income needed for the monthly mortgage payment with a 20 percent down payment stood at 23 percent. With a 3.5 percent down payment, the share of income is higher, at 26 percent in April 2018,” Urban Institute said in its report. If interest rates rise to 5.3 percent, the housing expenses to income share with both a 20 percent and a 3.5 percent down payment would be the same as the 2001-03 averages,” indicating that homes remained affordable by historical standards despite price increases over the last five years.

It indicated that the increase of FTHBs in the market had increased over the last few years in part because of the expanding economy, but their increasing share was mostly driven by a pullback of repeat buyers from the market.

“Between 2000 and 2007, repeat buyers accounted for anywhere from 1.4 million to 1.8 million home purchases per year, while FTHBs drove anywhere from 900,000 to 1.3 million annual home sales,” the report said. “Today the two have traded places as in 2017, repeat buyers were responsible for just over a million home purchases, while FTHBs bought close to 1.5 million homes”

The report indicated that the reversal in this trend was mainly due to homeowners not wanting to move from the low mortgage rates they had locked in during the previous years.

About Author: Radhika Ojha

Radhika Ojha is an independent writer and copy-editor, and a reporter for DS News. She is a graduate of the University of Pune, India, where she received her B.A. in Commerce with a concentration in Accounting and Marketing and an M.A. in Mass Communication. Upon completion of her masters degree, Ojha worked at a national English daily publication in India (The Indian Express) where she was a staff writer in the cultural and arts features section. Ojha, also worked as Principal Correspondent at HT Media Ltd and at Honeywell as an executive in corporate communications. She and her husband currently reside in Houston, Texas.

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