Foreclosure Filings
The soaring housing prices over 2020 and 2021 have been a windfall for many owners. The rock bottom interest rates pushed prices up but also created a separate category of beneficiaries. Not mentioned may be the owners facing foreclosure filings who have been able to sell or re-work mortgages. The federal government shipped out trillions of dollars for aid, kept rates below normal, bought trillions of new mortgages at the lowest rates in history, and imposed forbearance for 18 months.
As of January 2022, entering forbearance ended as an option. However, perhaps 1 million or more still remain in forbearance. Borrowers under federal mortgages (FNMA, FHLMC, FHA, VA, USDA) had up to 18 months of relief. The actual end date for the last of those still in forbearance has had many changes. Current opinion reflects a drop dead date ending 1st quarter 2022. However, we saw forbearance on federal student loans extended to May 2022 ($0 payments, $0 interest) no matter what the borrower could afford.
Foreclosures on homes in the U.S. surged in January 2022 after a pandemic moratorium ended according to new data from RealtyTrac. Foreclosure filings such as default notices, scheduled auctions or bank repossessions jumped 29% from a month earlier. They more than doubled compared with January 2021, the report said. Lenders repossessed 4,784 properties in the month and started the process on another 11,854 homes.
How is Forbearance Progressing?
Millions of loans entered forbearance since the beginning of Covid in March 2020. Many of those entered in the first 3-6 months and have no forbearance option remaining other than exit or foreclosure. The most recent statistics provided for the end of January for forbearance by the Mortgage Bankers Association:
- By stage, 26.8% of total loans in forbearance are in the initial forbearance plan stage, while 59.5% are in a forbearance extension. The remaining 13.7% are forbearance re-entries, including re-entries with extensions.
- Of the cumulative forbearance exits for the period from June 1, 2020, through January 31, 2022, at the time of forbearance exit:
- 29.1% resulted in a loan deferral/partial claim.
- 19.3% represented borrowers who continued to make their monthly payments during their forbearance period.
- 17.0% represented borrowers who did not make all of their monthly payments and exited forbearance without a loss mitigation plan in place yet.
- 14.9% resulted in a loan modification or trial loan modification.
- 11.6% resulted in reinstatements, in which past-due amounts are paid back when exiting forbearance.
- 6.8% resulted in loans paid off through either a refinance or by selling the home.
- The remaining 1.3% resulted in repayment plans, short sales, deed-in-lieus or other reasons.
- The five states with the highest share of loans that were current as a percent of servicing portfolio: Idaho, Colorado, Washington, Utah, and Oregon.
- The five states with the lowest share of loans that were current as a percent of servicing portfolio: Louisiana, Mississippi, New York, Indiana, and Illinois.
Effect on Foreclosure Filings
All this government intervention created an anomaly in foreclosures. ATTOM, a housing and mortgage industry data firm put together this graph showing the trend of foreclosure filings.
2020 and 2021 foreclosure filings fell to the lowest in more than 15 years. Of course you can’t file for foreclosure if the government prohibits it. What happens now?
“The government’s foreclosure moratorium, the mortgage forbearance program, and the mortgage servicing guidelines enacted by the CFPB in August have kept foreclosure starts artificially low over the past year,” Sharga added. “While the recovering economy should prevent a huge increase in defaults, we should see a gradual increase in foreclosure activity as these programs expire, and servicers exhaust all loan modification options for delinquent borrowers.”
Nevada, which along with Arizona, had the highest foreclosure rates during most of the housing crisis, again had the highest rate of filings at 0.26 percent of its housing units. It was followed by Illinois (0.23 percent); Florida (0.21 percent); Delaware (0.21 percent); and New Jersey (0.19 percent).
U.S. properties foreclosed in the fourth quarter of 2021 had been in the foreclosure process an average of 941 days, a 2 percent increase from the previous quarter and up 10 percent from a year ago. The length of time was highest in Hawaii at 2,491 days and New York and Pennsylvania with averages just over 1,500 days. On average, it now takes almost 3 years to foreclose on someone not paying. Look for that time period to be reduced in many states. But states such as New York will continue to protect non-payers for long periods for political reasons.
