Mortgage customers aren’t happy – in fact, the last time they were this unhappy was April 2018 – and they’ve been letting the Consumer Financial Protection Bureau know just how they feel, flooding the agency with complaints.
The issue that is getting the most unhappiness is forbearance, closely followed by a mortgage loan modification. When mortgage forbearance was introduced through the CARES act, it was for twelve months. In February, President Biden directed Federal housing regulators to extend the program for another six months and to also prolong foreclosure relief programs. Borrowers who entered at the start of the program are getting nervous about what will happen when this period expires. (as is the CFPB – submissions close on 11th May for a proposed “temporary Covid-19 emergency pre-foreclosure review period” which would essentially block mortgage servicers from starting the foreclosure process until after December 31, 2021.) Even though lenders are trying to help, it appears that the volume of inquiries is causing problems – borrowers are complaining that their mortgage servicers are hard to reach, and they find it difficult to find information about the forbearance programs. Concerns are that the CFPB may see the need to start to crack down on mortgage loan servicers if borrowers can’t get the information they want in a timely manner – and if servicers aren’t coping now, there is the possibility that things could get a lot worse – soon. “Emergency protections for homeowners will start to expire later this year and by the fall, a flood of borrowers will need assistance from their servicers,” CFPB Acting Director Dave Uejio said last week. “The CFPB is proposing changes to the mortgage servicing rules that will ensure servicers and borrowers have the tools and time to work together to prevent avoidable foreclosures, which disrupt lives, uproot children, and inflict further costs on those least able to bear them.” As of late March, MBA figures show that around 2.5 million homeowners are in some kind of forbearance program, and despite those figures, around 5% of Americans are delinquent on their home loans at the moment. Which states have the worst delinquency rates? Lousiana 9.2% Mississippi 8.4% New York 8.0% New Jersey 7.6% Maryland 7.5% National 5.6%
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Purchase application volume declined for the second consecutive week as interest rates inched up one basis point, according to data from the Mortgage Bankers Association.
MBA’s Market Composite Index dropped 0.9% week over week on a seasonally adjusted basis. The refinance index rose 0.1% from a week ago and was 17% lower than the same period in 2020. Meanwhile, the seasonally adjusted purchase index dipped 3% week over week. Unadjusted, it was down 2% week over week and was 24% higher year over year. “There was a mixed bag of action in the mortgage market last week. Mortgage rates were slightly higher, refinance applications were essentially unchanged, and purchase applications fell for the second straight week,” said Joel Kan, AVP of economic and industry forecasting at MBA. “Both conventional and government purchase applications declined, but average loan sizes increased for each loan type. This is a sign that the competitive purchase market, driven by low housing inventory and high demand, is pushing prices higher and weighing down on activity. The higher prices are also affecting the mix of activity, with stronger growth in purchase loans with larger-than-average balances.” The refinance share of mortgage activity grew to 61% of total applications from 60.6% the prior week. The adjustable-rate mortgage (ARM) share of activity increased to 3.9% of total applications. The FHA share decreased six basis points to 10.1% week over week, the VA share decreased three basis points to 11.9%, and the USDA share of total applications remained steady at 0.4%. “An increase in conventional refinances was offset by a decline in government refinances. The 30-year fixed-rate was up slightly to 3.18%, which is still 22 basis points lower than a year ago, but higher than it was between mid-2020 and February 2021.” The estimated lifetime default risk of government-backed home loans remained flat in the fourth quarter of 2020, results of the Milliman Mortgage Default Index (MMDI) revealed.
As interest rates fell to record lows, mortgage default risk rate for GSE loans dropped from 1.28% in Q3 to 1.27% in Q4. Meanwhile, the MMDI rate for Ginnie Mae loans edged up from 7.39% to 7.64% quarter over quarter. Buoyed by solid borrower demand and low rates, mortgage volume for government-backed loans soared by more than 132% year-over-year. Refinance loans made up roughly 71% of GSE mortgage volume for the quarter, while approximately 56% of Ginnie Mae loans originated in Q4 were the result of refinancing. Cash-out refinance volume, which is typically seen as riskier loan products relative to rate/term refinance mortgages, increased significantly. GSE cash-out refinance mortgages averaged approximately $5 billion per month from 2014 through 2019 and around $2.5 billion per month for Ginnie Mae. For the second half of 2020, cash-out refinance volume was up to over $20 billion per month. “Leading up to the global financial crisis, cash-out refinance mortgage loans were a significant driver of risk as many borrowers extracted equity from growing home prices,” said Jonathan Glowacki, a principal at Milliman and author of the MMDI. “While cash-out refinance volume has increased significantly in 2020 and 2021, we believe the risk is now somewhat mitigated by tighter underwriting standards, namely capped LTV ratios.” Mortgage rates rise, but remain under 3%. Rates rose 1 basis point to 2.98%, per Freddie Mac's PMMS5/4/2021 For the second consecutive week, mortgage rates managed to hold steady below 3%, rising one basis point last week to 2.98%, according to Freddie Mac’s Primary Mortgage Market Survey.
In light of the rising COVID-19 caseloads globally, U.S. Treasury yields stopped moving up a month ago and have remained within a narrow range as the market responds to incoming economic data, noted Sam Khater, Freddie Mac’s chief economist. While traders typically become hesitant ahead of economic speeches from the Federal Reserve, the FOMC once again did not change its stance on inflation and asset purchases, despite forward economic recovery. Overall, Fed purchases helped to drive mortgage rates and other loan interest rates to the lowest level on record in 2020 by boosting competition for bonds, which compresses yields. “The good news is that with rates under three percent, refinancing continues to be attractive for many borrowers who financed before 2020,” Khater said. “But, for eager buyers, especially first-time homebuyers, inventory continues to be extremely tight and competition for available homes to purchase remains high.” With mortgage rates continuing to hover nearly 30 basis points lower than they were a year ago, competition is getting fiercer than ever. The latest S&P CoreLogic Case-Shiller Home Price Index report showed a 12% annual gain in February, up from 11.2% in January and the ninth straight month of increasing prices. Heightened lumber costs aren’t helping: the National Association of Home Builders reported lumber prices have tripled over the past 12 months and have caused the price of an average new single-family home to increase by $35,872 — up from the NAHB’s calculated $24,000 extra HousingWire reported back in February. However, after last year’s record $3.83 trillion in mortgage originations, the MBA forecasts volume to fall 14% this year to $3.28 trillion, which would still be the third-highest total on record. Mortgage rates are still lower than they were a year ago, MBA chief economist Mike Fratantoni said, and while they will likely get high enough to create a flip in the amount of borrowers refinancing versus purchasing, they won’t reach a peak that would be harmful to purchase originations. ATTOM Data Solutions, licensor of the nation's most comprehensive foreclosure data and parent company to RealtyTrac, today released its Q1 2021 U.S. Foreclosure Market Report, which shows there were a total of 33,699 U.S. properties with foreclosure filings — default notices, scheduled auctions or bank repossessions — during the first quarter of 2021, up 9 percent from the previous quarter but down 78 percent from a year ago.
The report also shows a total of 11,880 U.S. properties with foreclosure filings in March 2021, up 5 percent from the previous month but down 75 percent from March 2020 — the second consecutive month with month-over-month increases in U.S. foreclosure activity. "The foreclosure moratorium on government-backed loans has virtually stopped foreclosure activity over the past year," said Rick Sharga, executive vice president of RealtyTrac, an ATTOM Data Solutions company. "But mortgage servicers have been able to begin foreclosure actions on vacant and abandoned properties, which benefits neighborhoods and communities. It's likely that these foreclosures are causing the slight uptick we've seen over the past few months." Highest foreclosure rates in Delaware, Illinois, and Florida Nationwide one in every 4,078 housing units had a foreclosure filing in Q1 2021. States with the highest foreclosure rates were Delaware (one in every 1,705 housing units with a foreclosure filing); Illinois (one in every 2,175 housing units); Florida (one in every 2,237 housing units); Indiana (one in every 2,397 housing units); and Ohio (one in every 2,500 housing units). Among 220 metropolitan statistical areas with a population of at least 200,000, those with the highest foreclosure rates in Q1 2021 were Lake Havasu City, Arizona (one in every 518 housing units); Provo, Utah (one in 1,280); McAllen, Texas (one in 1,297); Shreveport, Louisiana (one in 1,353); and Atlantic City, New Jersey (one in 1,441). Other major metros with a population of at least 1 million and foreclosure rates in the top 50 highest nationwide, included Cleveland, Ohio at No.6, Birmingham, Alabama at No. 9, Jacksonville, Florida at No. 12, Miami, Florida at No. 34, and Riverside, California at No. 39. Foreclosure starts increase 3 percent from last quarter Lenders started the foreclosure process on 17,652 U.S. properties in Q1 2021, up 3 percent from the previous quarter but down 78 percent from a year ago. Those states that saw the greatest quarterly increase in foreclosure starts and had 500 or more foreclosure starts in Q1 2021, included California (up 36 percent); Ohio (up 25 percent); North Carolina (up 15 percent); Virginia (up 11 percent); and South Carolina (up 10 percent). Bank repossessions increase 14 percent from last quarter Lenders repossessed 7,320 U.S. properties through foreclosure (REO) in Q1 2021, up 14 percent from the previous quarter but down 87 percent from a year ago. Those states that had the greatest number of REOs in Q1 2021 were Florida (945 REOs); Illinois (610 REOs); California (414 REOs); Texas (370 REOs); and Arizona (330 REOs). Average foreclosure timeline increases 8 percent in first quarter 2021 Properties foreclosed in the first quarter of 2021 had been in the foreclosure process an average of 930 days, up 8 percent from an average 857 days for properties foreclosed in the fourth quarter of 2020 and up 38 percent from an average of 673 days for properties foreclosed in the first quarter of 2020. "The government's foreclosure moratorium, and the CARES Act mortgage forbearance program have extended foreclosure timelines for owner-occupied homes by a full year," Sharga noted. "Hopefully, this extra time will give financially-distressed homeowners the chance to get back on their feet, and work with their lenders to avoid a foreclosure when the government programs expire." States with the longest average foreclosure timelines for properties foreclosed in Q1 2021 were Arizona (1,939 days); New Jersey (1,764 days); New York (1,691 days); Pennsylvania (1,654 days); and Hawaii (1,650 days). States with the shortest average times to foreclose in Q1 2021 were West Virginia (48 days); Montana (76 days); Nebraska (112 days); Mississippi (132 days); and Missouri (189 days). March 2021 Foreclosure Activity High-Level Takeaways
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