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Forbearances decrease and foreclosures rise in Q3 2021

Forbearances drop, foreclosures rise
by Brad Cartier, posted in Newsletter

Diana Olick of CNBC opens up this week’s newsletter discussing forbearances, specifically that there are still 1.6 million borrowers in forbearance (3.1% of all mortgages). That said, 98% of those forbearance borrowers have at least 10% of equity in their homes as a result of fast-rising home prices. At the beginning of the pandemic, there was $6 trillion in housing equity in the U.S., now that number sits at $9 trillion.

Olick quotes Ben Graboske, president of data and analytics for Black Knight, in this article as noting:

“Such strong equity positions should help limit the volume of distressed inflow into the real estate market as well as provide strong incentive for homeowners to return to making mortgage payments — even if needing to be reduced through modification.”

Spencer Lee of National Mortgage News (subscription required) reported last week on forbearance data, noting that “Forbearance numbers continued their steady decline this year, now down by more than two-thirds from the peak in 2020, as the end of CARES Act protections is expected to lead to further reductions in September.” Week-over-week, forbearances dropped by just over 5%.

Forbearance data - NMN

Source: National Mortgage News

As moratoriums expire, foreclosures are on the rise according to new data from ATTOM Data Solutions. In their August 2021 U.S. Foreclosure Market Report, there were over 15,000 properties with foreclosure filings, which is up 27% month-over-month, and 60% year-over-year.

“We’ll continue to see foreclosure activity increase over the next three months as loans that were in default prior to the moratorium re-enter the foreclosure pipeline, and states begin to catch up on months of foreclosure filings that simply haven’t been processed during the pandemic. But it’s likely that foreclosures will remain below normal levels at least through the end of the year.”

FHFA equitable financing

The Federal Housing Financing Agency (FHFA) announced that by the end of 2021, Fannie Mae and Freddie Mac will submit Equitable Housing Finance Plans. According to the release:

“The plans will identify and address barriers to sustainable housing opportunities, including the Enterprises’ goals and action plans to advance equity in housing finance for the next three years. FHFA also will require the Enterprises to submit annual progress reports on the actions undertaken during the prior year to implement their plans.”

Jann Swanson of Mortgage Daily News reports on this, noting that the CEO of Freddie Mac applauded the move. CEO of Freddie Mac, Michael DeVito, is quoted as saying “This work builds upon the company’s long track record of making home possible for homebuyers and renters across all markets and dimensions, including race, ethnicity, sexual orientation and ability. Together, we can identify and address barriers to sustainable housing, expand credit responsibly and bring greater equity to the American Dream.”

Georgia Kromrei of Housing Wire (subscription required) noted that the terms of the conservatorship of both Fannie and Freddie mandate their support of the FHFA’s decree, and that the 4-month timeline on the plan submission is tight for these GSEs.

Rental update

Both rents and homebuyer mortgage payments have risen sharply this year. According to new Redfin data, average monthly rents in August jumped 9% year-over-year, but so too did mortgage payments which shot up 67% faster than rents during the same period.

Rent increases versus mortgage payments - Redfin

Source: Redfin

This rise in homebuyer mortgage payments is reflective of rising real estate prices generally, and despite continued low-interest rates. That said, Redfin reports that “the average monthly rent of $1,836 is still larger than the $1,494 median monthly mortgage payment for new homebuyers.” Florida metro markets took the top 5 spots in rent increases, with Tampa leading the charge at 29% in a year-over-year rent price increase.

Kelsi Maree Borland of Globe St also reported this week that multifamily development is rebounding stronger than expected this year due to strong demand and higher than expected rents.

Litic Murali of the National Association of Homebuilders (NAHB) reports on further multifamily data showing that construction has rebounded fast, particularly in the smaller and suburban markets.

“The [Home Building Geography Index] HBGI shows that multifamily residential construction grew by 14.3% in small metro urban cores and 25.5% in small metro suburban areas in the latest quarter. In contrast, large metro core areas recorded a 0.5% year-over-year decline, reflecting the ongoing virus crisis’s baneful effects on housing in core counties of major metropolitan areas that started over a year ago.”

Construction growth rates in the US - NAHB

Source: NAHB

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