Forebearance Foreclosure Rush? Not exactly...

Many people are worrying about what happens when COVID-related forbearance plans expire. However the Black Knight Mortgage Monitor report released today suggests that the problem is likely to be less severe than might be expected.

I refer you to the original release, but some highlights are worth picking out:

• Of the 6.1 million homeowners who have been in COVID-19-related forbearance plans, 41% (2.4M) have since exited, with the vast majority of those borrowers currently performing; of those who remain past due, 267,000 are in active loss mitigation with their lenders
• Just 54,000 loans are past due and not in active loss mitigation, and 70% of these were already past due in February before the pandemic began to impact mortgage performance
• Record levels of equity continue to help mitigate foreclosure risk, with only 9% of homeowners in forbearance having less than 10% equity in their homes
• The average homeowner now has nearly $125,000 in tappable equity; an increase of more than $3200 from last year – also a record. These strong equity positions help to provide a backstop to elevated delinquency levels and slow recovery from COVID-19-related impacts. 

The state of Arizona has 5.7% of first position loans that are delinquent by 30 days or more. Only 0.1% are in foreclosure and the remaining 5.6% are non-current. This is around double what we saw in August 2019. Arizona ranks 38th among the states, with Mississippi worst (11.7% noncurrent) and Idaho best (3.8% non-current).

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The Daily Observation above is noteworthy good news in terms of mitigating the concern about the consequences of forbearance plans. 

There's a secondary message here: We've pointed out the half dozen or so reasons that today's rapid appreciation does NOT mirror the residential crash in 2007-8 following the rapid appreciation in 2005-6. 

The above article indirectly speaks to one of them - today's sellers have an equity position (unlike the situation that devolved from the 'liar loans' that underwrote the feeding frenzy preceding the crash - an important distinction).