What 2022 Holds for the Forbearance and Foreclosure Landscape

RealtyTrac EVP Rick Sharga and Mortgage Policy Advisors (MPA), Managing Director and Five Star Global Chairman Ed Delgado were recently featured in a DS News-hosted webinar titled “Reflections and Projections: Lessons Learned From 2021 and the Outlook for 2022.”

The duo shared their experiences of the market from 2021, discussing the forbearance and foreclosure landscape, and how the market will be impacted by these forces in 2022.

“The presumption at the start of the pandemic was that there was going to be this gradual swelling of foreclosures, as forbearances expired and consumers had nowhere to go,” said Delgado. “They weren’t going to be able to lump-sum the arrears because interest rates were low.”

Approximately 3.8 to 4.2 million U.S. homes found themselves in forbearance in 2021, with that number dropping significantly to around one million in 2022, according to Sharga. Another quarter of a million forbearances are predicted to expire in 2022.

Assisting those in need were the industry’s service providers and the mortgage industry overall in applying the CARES Act throughout the coronavirus pandemic, which helped save some 4.2 million homes from unnecessary foreclosures.

Delinquencies fell for 10 consecutive months, which wouldn’t be nearly as high if there weren’t as many houses in active forbearance. Once a home surpasses 90 days in forbearance, it automatically falls into severe delinquency.

“I look to the low number of new delinquencies, as being very positive,” said Sharga. “It speaks to the quality of loans entering and exiting the system.”

With forbearance exits on the rise to start the year, foreclosure activity remains at a historic lows. Data showed the U.S., on average, dropped 60% in foreclosures from 2019.

Sharga and Delgado discussed the housing market forecast remaining close to steady as predicted, as there were consecutive high home sales from September 2019 to the end of 2020. The MBA forecast that purchase originations were on pace to increase 16% to hit a new record mark of $1.67 trillion in 2021. For 2022, the MBA predicts that purchase mortgage originations are expected to grow 9% to yet another new record of $1.73 trillion in 2022. After an anticipated 14% decline in 2021, the MBA anticipates refi originations will slow further throughout 2022, decreasing by 62% to $860 billion from $2.26 trillion in 2021.

Delgado also touched on the industry impact of some 4.4 million people resigning or quitting their jobs, and how it directly impacts the housing market regarding affordability. And while the new year was to bring with it a replenishment of housing inventory, the nation’s housing supply has remained constricted to begin the new year, with Zillow recently reporting inventory levels in December 2021 dropping by 11.1% to an all-time-low of 923,000 units. This number represents a 19.5% reduction from levels seen at the end of 2020, and a 40.5% drop from pre-pandemic times at the end of 2019.

“The only reason those numbers aren’t higher, is because there’s nothing available to buy,” said Sharga. “Properties are selling across the country in less than two weeks. We’re still seeing properties selling over their listing price and less price reductions.”

Millennials, being the largest group of consumers in the U.S., are currently in their “prime” homebuying age. Although interest rates sit at 3%, which is considered high, they’re still at significant lows.

“ATTOM data suggests that in more than half the counties across the country, it is more affordable to make a monthly mortgage payment than it is to make a monthly rent payment,” said Sharga.

With the pandemic still in play, consumers are snatching up any and every opportunity to buy homes, despite the small supply and rise in rates. Home prices are up 18-20% depending on state and metro areas. Record homeowner equity is beyond a trillion dollars, resulting in home sales and prices soaring within the coming year. Price appreciation is expected to slow, as more houses are being sold off the market.

Click here to listen to view the complete DS News Series webinar “Reflections and Projections: Lessons Learned From 2021 and the Outlook for 2022.”