A recent study by the MIT Sloan School has found that Black Americans are paying more to be homeowners, leading to a significant loss of retirement income and exacerbating the wealth gap between the country’s white and Black populations.
In “Unequal Costs of Black Homeownership”, authors Michelle Aronowitz, Edward L. Golding, and Jung Hyun Choi assert that higher mortgage interest costs, mortgage insurance premiums, and property taxes all play a role in making homeownership both more expensive and riskier for Black borrowers. Citing data from the Urban Institute, the report’s authors say that if the extra costs paid by African Americans were eliminated, the $130,000 Black-white gap in liquid earnings at retirement would be cut in half. “These inequities make it impossible for black households to build housing wealth at the same rate as white households,” reads the report. “A fair homeownership system must reform these inequitable federal, state, and local policies.” Higher mortgage rates at origination The report’s authors found that “over-pricing for perceived risk factors”, including lower credit scores and higher loan-to-value ratios, is a prime factor in the higher costs paid by Black homeowners. Taking into consideration in all purchase loans, the average interest rate for African American homeowners was 12 bps higher than for white homeowners. For GSE purchase loans, where risk-based pricing is more prevalent, the difference is 20 bps. The authors calculate that Black homeowners pay approximately $250 more per year in interest charges for purchase loans. $250 a year doesn’t sound like much, but if a 40-year old could instead save that $250 for 25 years at four percent interest, the result would be an extra $11,000 in retirement savings. (That formula pops up repeatedly in the study.) Higher interest rates due to a lack of refinance opportunities America’s COVID-era refi boom was seen as a major windfall for homeowners, but the study says white homeowners are often able to take advantage of falling rates and the lower overall costs that result from well-timed refinances more often than Blacks. Refi activity was 2.5 percent higher for whites than Blacks in 2019. The report’s authors provide several possible reasons for the discrepancy, including a higher rejection rate of Black applicants. 2019 data shows that lenders rejected at least six percent of credit-worthy Black and Latinx refi applicants. From 2009 to 2015, between 740,000 and 1.3 million creditworthy Black and Latinx applicants were rejected for refinances. Many borrowers of color, the authors explain, are told by their lenders or servicers that they don’t qualify for a refinance because of unfavorable debt-to-income or LTV thresholds, even though they have already been deemed responsible enough to be granted a mortgage. Some are told that past delinquencies disqualify them, even though refinancing at a lower rate would reduce the overall risk associated with the mortgage. As the study states, “there is no additional credit risk added to the economy when a mortgage is refinanced to a lower rate, while there is significant financial benefit to the lender when the borrower holds the mortgage at above-market rates.” It is estimated in the report that Blacks pay $475 more per year in interest than whites because of a lack of refinance opportunities, resulting in lost retirement savings of almost $20,000. Higher mortgage insurance and property taxes Because of a shortage of down payment funds, Black homeowners are regularly required to pay more in mortgage insurance premiums. The study found that the average difference between what African Americans and whites pay in mortgage insurance is $550 per year, which adds up to $23,000 in lost retirement savings. Only 12 percent of Blacks homeowners don’t pay for mortgage insurance versus 38 percent of white homeowners. Blacks also pay higher property taxes than similarly situated white homeowners. Citing recent national data, the report’s authors found that black homeowners pay 13% more in property taxes than whites whose properties lie in the same jurisdiction. The tax aspect took Tai Christensen, director of government affairs for CBC Mortgage Agency, by surprise. “Since appraisal values in black neighborhoods are typically less than like properties in white neighborhoods, it was striking to find that black families are actually paying higher taxes for homes deemed less valuable,” she says. “By paying higher taxes for less valuable homes, black families are creating far less wealth through home equity, which continues to perpetuate the racial wealth gap in this country. What to do? Golding, who is also the executive director of the MIT Golub Center for Finance and Policy, told CNN that while mortgage costs are determined by markets to some extent, "there is a great deal of public policy that influences these rates, especially as it impacts people of color. The report makes several recommendations for addressing these policies, including tax credits for first time homeowners, which could be used as down payments. Such a move could lessen the impact of risk-based pricing and eliminate the need for these buyers to acquire mortgage insurance. It also suggests creating a government supported insurance program that would continue making a borrower’s mortgage payments in the event of unemployment or disability. Christensen feels such a program would be “transformative” for Black homeowners. “As we have seen through the COVID-19 pandemic, the majority of the people negatively affected by illness and employment loss are from Black and brown communities,” she says. “Having an insurance program that is government sponsored to ensure people are able to keep current on their mortgage payments during times of crisis could help to ensure sustainable homeownership in our communities of color.” In the eyes of the study’s authors, the change that would prove most beneficial is the end of risk-based pricing, which disproportionately impacts Black and brown borrowers, and a move toward risk-pooling that would distribute risk evenly among a lender’s borrowers. Getting rid of the capital buffers on low FICO or high LTV mortgages could also be significant. Risk-based pricing, the study asserts, is largely a hangover from the Great Recession; the work of an over-cautious FHFA that fears repeating the mistakes that led to the implosion of the country’s housing market. “These capital standards have the effect of placing the burden of staving off a repeat of the 2008 Great Recession on black homeowners, even though black homeowners were primarily the victims of the crisis, not its cause,” the report says. “The important point is that risk-based pricing is not required for safe lending but is the result of policy decisions that can be safely reversed while continuing to support a profitable mortgage industry.”
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A top Democrat has slammed financial regulators, accusing them of being “asleep at the switch” as the COVID-19 pandemic threatens the housing market and the broader economy.
In a letter to leaders at the Federal Reserve, the National Credit Union Administration, the FDIC, and the Office of the Comptroller of the Currency, Sen. Sherrod Brown (D-Ohio) said the agencies were not doing enough to prepare for threats to financial stability. “Your agencies must ensure that our financial system is sage and strong, so that this public health and economic crisis does not turn into a financial crisis,” Brown wrote. “Yet, bank and credit union exposure to deteriorating economic conditions, lax regulation, and the public health risks of managing a financial crisis and resolving failed institutions during a deadly pandemic raise serious financial stability concerns. I am deeply concerned that the system is blinking red and, just as in the lead-up to the 2007-2008 financial crisis, you are asleep at the switch.” Brown said that millions of Americans were having trouble meeting their housing costs. “AN estimated 11 million adults report that their household is behind on rent, with higher rates of hardship reported by Black and Latino adults than their white counterparts,” he wrote. “…Homeowners are struggling to make their mortgage payments and face the risk of foreclosure, and up to 40 million Americans are at risk for eviction over the next several months. The commercial real estate market shows signs of distress as small businesses continue to face declines in revenue and are forced to shutter.” Brown said that without additional relief to individuals and small businesses, these conditions created a vulnerability “that could ripple through the banking system.” The senator also slammed the Trump administration’s deregulatory agenda, which he said had left the US financial system at risk even before the pandemic. “This Administration has rolled back important protections put in place in response to the last financial crisis intended to safeguard our financial system and protect consumers from predatory lending, risky investment activities, and exposure to overleveraged companies,” Brown wrote. “The banking agencies have also lowered capital requirements and sanctioned the continued issuance of dividends, allowing banks to prop up their executives and shareholders, instead of lending in their communities.” Brown accused the regulators of going further than Congress provided for in order “to turn temporary regulatory relief measures meant to help consumers and small businesses during the pandemic into industry giveaways.” “‘Watchful waiting’ and deregulation are insufficient regulatory responses to the myriad stressors in the financial system,” Brown wrote. “The COVID-19 pandemic has created fragility across sectors and any one could trigger bank failures and financial contagion. Your agencies must show that they are responding to and preparing for threats to financial stability before the real economy suffers even further.” Landlords say that more than half of their tenants are having trouble making rent, according to new data from real estate tech company Snappt.
According to Snappt’s 2020 Effects of the COVID-19 Pandemic on Residential Rentals survey, 53% of residential tenants are struggling to pay their housing costs, mostly due to the economic fallout from the pandemic. A quarter of people are paying late, while 17% now pay less than full rent, and 11% have stopped paying at all. This is also driving a 75% increase in evictions, with a current eviction rate of 21%. “Many of these evictions are awaiting the expiration of moratoriums, with the typical building having 15 evictions stacked up,” Snappt said in an email to MPA. Twenty-five percent of these evictions are associated with application fraud, which has increased dramatically in the wake of COVID-19, according to Snappt. “The survey shows that nearly a third of applications now exhibit application fraud,” said Daniel Berlind, co-founder and CEO of Snappt. “That represents a nearly doubling since the pandemic hit.” Eighty-five percent of property managers reported that they had been a victim of application fraud, up from 66% last year. And the fraudsters are getting slicker; pre-pandemic property managers felt that only one in 10 fraudulently altered rental applications slipped by undetected. They now say that one in four fraudulent applications escape detection. “With the increase in tenants not able to pay rent and increase in application fraud, the COVID-19 pandemic has cost the typical building $71,500 since March,” Snappt said. The supply of mortgage credit in the US reached another record low in September, continuing a downward trend that was driven by a decline in the conforming loan segment.
Mortgage credit availability dwindled by 1.9% to a reading of 118.6 in September, down from 120.9 in August, according to the Mortgage Bankers Association’s Mortgage Credit Availability Index (MCAI). A decline in the MCAI indicates that lending standards are tightening, while increases in the index are indicative of loosening credit. "Mortgage credit supply decreased in September to its lowest level since February 2014, driven in part by a 9.5% decline in the conforming loan segment. This reduction was the result of lenders discontinuing conforming ARM loan offerings in advance of the September 30, 2020, application deadline for GSE-eligible, LIBOR-indexed ARM loans," said Joel Kan, MBA's associate vice president of economic and industry forecasting. The MCAI report showed that conventional mortgages decreased by 6.1%, while the government MCAI increased by 1.4%. Within the conventional MCAI component, the jumbo MCAI dipped by 2.1%, and the conforming MCAI slumped by 9.5%. "Across all loan types, there continues to be fewer low credit score and high-LTV loan programs," Kan said. "The housing market overall is on strong footing, but the data show that lenders are being cautious, given the spike in mortgage delinquency rates in the second quarter, as well as the ongoing economic uncertainty." Mayor Lori Lightfoot’s dark vision of the city’s 2021 budget deficit skyrocketing to $1.2 billion is frightening to the average homeowner who likely will have to dig deeper in 2021 to pay ever-increasing real estate tax bills.
Earlier in 2020 the COVID-19 virus spiked the budget shortfall to nearly $800 million, and the mayor said the deficit would be filled using relief funds, federal dollars, debt refinancing, and borrowing. This bad news comes after homeowners scratched to pay the final installment of the largest property tax hike in Chicago’s history – $589 million phased in over the past four years to pay for pensions for the city’s police officers and firefighters. Analysts say Mayor Lightfoot now is considering a plan to save $200 million in 2021 by reducing the city’s work force of 31,000 full-time and 1,800 part-time employees through furloughs and layoffs. Since many city workers are members of municipal unions, the mayor is asking Chicago labor unions to suggest alternatives and measures to help protect workers. Other cost cutting could come from tapping surplus Tax Increment Financing (TIF) funds. Chicago property owners will receive the first installment of the 2020 real estate tax bill due on March 1, 2021. Typically, the amount of the first installment is 55 percent of the last year’s total bill. Hefty 2020 property tax bill increases could come due in August 2021, when the second installment of the bill arrives. Along with paying for the skyrocketing city budget, much of the predicted property tax increase also could depend on the work of Cook County Assessor Fritz Kaegi (left), who said he has dramatically revamped the assessment process, especially how commercial properties are valued. Kaegi said he started from the ground up, reworking the assessment formula and drawing on Multiple Listing Service information about sales prices. For 2020, the assessor is re-assessing the south and western suburbs. Crystal ball gazing into the outlook for the expected 2020 property tax hike, payable in 2021, is cloudy, tax experts say. “The property tax bill is determined by four factors – the assessment, the equalization factor or multiplier, the tax rate, and the exemptions,” said Michael Griffin (right), a Chicago real estate tax appeal attorney. Homeowners also should review their exemptions because they can reduce their tax bill if they have the proper exemptions applied to their tax bill, Griffin noted. The three main exemptions are the Homeowner Exemption, Senior Exemption, and Senior Freeze. The Homeowner Exemption recently was increased to $10,000 from $7,000, and the Senior Exemption was hiked to $8,000 from $5,000. Those amounts are deducted from equalized assessed value of a home to which tax rates are applied to determine individual tax bills. Also, more seniors can qualify for the Senior Freeze because the Illinois Legislature increased the maximum annual income to receive the freeze to less than $65,000 from less than $55,000. “Every homeowner should review their last tax bill to see if they received the proper exemptions and contact the assessor if the exemptions are wrong,” Griffin advised. Predicting a hefty property tax increase next year really centers on two wild cards – the tax rate and the state equalization factor, which can’t be challenged by taxpayers. The equalization factor, or “multiplier,” is established each year for Cook County to bring property tax assessments in line with other parts of Illinois. The value is determined by the Illinois Department of Revenue. However, the main engine that drives up property tax bills is the amount of money spent by local government. Property owners who think they are over-assessed should file an appeal. The Cook County Assessor and Board of Review have expanded the online filing process so a homeowner can file their appeal without having to visit either office. Contact the assessor’s office to find comparable properties or start the appeal process. If the deadline for filing an appeal for your township has already passed at the assessor’s office, you still can file an appeal with the Cook County Board of Review and the Illinois Property Tax Appeals Board. Considering the availability of forbearance, why are 400K Americans behind on their mortgages?10/13/2020 Over the past eight months of COVID-19 chaos, one of the data points American mortgage pros have been keeping a close eye on has been the number of homeowners taking advantage of the mortgage forbearance option outlined in the CARES Act. As of October 5, the Mortgage Bankers Association calculated the total number of loans in forbearance to be 3.4 million, or 6.81 percent of servicers’ portfolio volume.
While the number of borrowers utilizing forbearance has been on a slow, steady decline for months, a new report from the Urban Institute has found that, despite forbearance having been made an accessible option back in April, there are still hundreds of thousands of Americans with what the Institute calls “needlessly delinquent mortgages.” The report puts the number of these loans at “approximately 400,000”, but doesn’t provide an explanation for the figure. It does, however, provide a link to a July blog post that said “530,000 homeowners who became delinquent after the pandemic began did not take advantage of forbearance” and added that “205,000 homeowners who did not extend their forbearance after its term ended in June or July became delinquent on their loans.” Calculating the exact figure, however, may not be as important as finding the reason why so many borrowers are not aware of such a widely publicized program that would unquestionably benefit them. “These borrowers may not know they are eligible for forbearance or do know but wrongly fear having to make ‘double payments’ when the forbearance period ends,” write authors Michael Neal and Laurie Goodman. “To provide information and support to these borrowers, it is important to understand who they are.” Neal and Goodman examined securities data on more than 200,000 Ginnie Mae borrowers who were current on their mortgages in March but at least 30 days delinquent by July in the hope that they might discover patterns – failures on the part of certain servicers, geographic concentrations of delinquencies, similar origination dates – that would explain such widespread ignorance around forbearance. They came up empty. The authors found that there is “virtually no difference” in the credit scores of needlessly delinquent homeowners and the almost 560,000 delinquent borrowers making use of forbearance. Each group had an average score of between 662 and 664. In looking at where borrowers have their loans serviced, the study determined that needlessly delinquent loans are “almost equally likely” to be serviced by banks or non-banks, with the share of such loans reaching approximately two percent for each cohort. Banks were found, however, to have a lower percentage of delinquent loans in forbearance. The age of a loan appears to play no part in determining whether a borrower will become needlessly delinquent. The percentage of delinquent, non-deferred loans has hovered around two percent since 2010, but the share of delinquent loans in forbearance has increased steadily from three percent in 2013 to eight percent in 2020. While the share of delinquent loans in forbearance varies greatly from state to state, the rate of needlessly delinquent mortgages shows no geographic concentration or variance. The issue, the study concludes, has been a general lack of outreach and client education around the issue of forbearance on the part of American mortgage professionals. “Servicers are an important part of this outreach, but outreach efforts must also include assistance from consumer groups,” reads the report. “Although some government messaging around forbearance options as an alternative has occurred, broader outreach may be in order.” A recent J.D. Power servicer satisfaction study found that customers generally feel they receive either too much or not enough attention from their lenders. Those receiving higher rankings regularly anticipated the needs of their clients and proactively provided relevant information to them, particularly around payment options and loan modifications. If only some of the delinquent borrowers the Urban Institute studied were Wells Fargo clients. The banking giant has been accused of placing more than 1,600 customers into forbearance programs without their consent. People struggling to meet their housing costs are least likely to vote on Election Day, according to a new study from Apartment List.
The COVID-19 pandemic and the resulting economic fallout have been major issues in this year’s presidential race, and President Donald Trump has recently contracted the virus himself. “Amid this continued volatility, we find that widespread struggles with housing costs have been troublingly stable since the start of the pandemic,” said study authors Igor Popov, Rob Warnock and Chris Salviati. Seventy-one percent of homeowners made a complete on-time mortgage payment in October, down from 73% in September. October is still an improvement over August, which had the highest rate of missed mortgage payments since Apartment List began the survey in April. The share of renters who made complete on-time payments in October increased slightly, with 31% failing to pay on time. That represents the best rate of on-time payment since the survey began in April. “Homeowners are also a bit more likely than renters to complete their housing payments by the end of the month, with only 8 percent having failed to make a full mortgage payment for September by the first week of October,” the study authors wrote. Despite improvements since August, the percentage of Americans struggling to meet their housing costs is substantial – and that contingent is less likely to vote in November, Popov, Warnock and Salviati said. “As the election rapidly approaches, we asked this month’s survey respondents about their intent to vote on November 3rd,” they wrote. “The results point to a concerning trend in the way that economic hardship interacts with political participation.” The study found that those who entered October with unpaid housing bills from previous months are significantly less likely to say that they will definitely vote in the upcoming election. “Among homeowners, 87 percent of those who started the month without any unpaid mortgage bills plan to vote, compared to just 60 percent of those who had unpaid bills,” the study authors wrote. “We observe a similarly large gap between renters who are fully caught up on their rent payments and those who have outstanding rent debt.” The disparity isn’t explained by political preference, the study found. “We find that rent debt and missed housing payments are common across the political spectrum, and missed payment rates were consistent across respondents in counties that Trump won and counties that Clinton won in 2016,” Popov, Warnock and Salviati wrote. “Those with no unpaid housing bills report being more likely to vote regardless of whether they report leaning Democrat or Republican.” A recent report by WalletHub took a magnifying glass to the economic havoc still being wreaked by the coronavirus to find out which states’ residents have been experiencing the most financial distress. The study, released in early September, can be viewed in a new, harsher light in the wake of President Donald Trump’s decision on Tuesday to end COVID-19 aid negotiations with Democrats in Congress.
The study, written by WalletHub’s Adam McCann, compared all 50 states and the District of Columbia using nine metrics, including average credit score, the change in the number of bankruptcy filings seen in each state from January to July 2020, and the number of people with accounts in distress, defined by McCann as “one which either is in forbearance or has its payments deferred.” According to the report, the ten states with the most residents in financial distress are: 1. Louisiana 2. Nevada 3. Indiana 4. Oklahoma 5. Florida 6. Texas 7. South Carolina 8. Kansas 9. District of Columbia 10. New York It’s a relatively diverse list that speaks to the wide-ranging destabilizing power of COVID-19. Nevada, Florida and, to some extent, New York, have all been decimated by the tourism industry’s induced coma. Louisiana was teetering on the brink of recession even before the pandemic. Residents in states like Indiana, Oklahoma, and Texas, where mask use was politicized and subsequently ridiculed by large sections of the population, have had to deal with extended income disruption as the states fail to get their economies safely up and running. (Data from Tuesday indicated that Indiana had experienced 12 straight days of more than 900 hospitalizations, and that hospitals in the state were treating 1,081 COVID-19 patients, a level the state hadn’t seen since May.) Breaking down the data according to individual metrics, however, finds that financial distress is virtually everywhere in America. The states with the highest changes in credit scores from January to August, for example, include Virginia, Rhode Island, and Georgia, in addition to Louisiana and D.C. Delaware, Utah, and Tennessee joined Nevada and Louisiana as the states that saw the greatest change in the share of people with accounts in distress. None of the states experiencing the biggest changes in the number of bankruptcy filings from January to July even appeared in the study’s top ten: South Dakota, Wyoming, Idaho, Utah, and Arizona. According to WalletHub analyst Jill Gonzalez, the distress being felt has wide-ranging implications. "On an individual level, the financial distress people are experiencing leads to long term financial damage, such as a drop in their credit scores, late payments and loan defaults, and eventually even bankruptcies,” she told MPA by email. “It can also make people rack up more debt to try to stay current on payments.” Gonzalez says individuals’ financial stress will likely hamper their states’ financial recoveries. “If they're unable to work and they're confined in their homes, residents will be shopping and consuming a lot less. This leads to a drop in budget income that, in turn, will prevent authorities from investing in the development of their states.” McCann concluded his report by comparing states based on whether they voted Democrat or Republican in the 2016 election. He found that the average ranking for red/Republican states came in at 21.27; for blue/Democrat states, it was 32.76. The smaller the number, the higher the number of distressed residents. It’s an interesting thought exercise, but a distraction from what Gonzalez feels is the study’s key lesson. "The most important lesson to take away from this study is that the pandemic is far from being over, and people are still going through serious financial troubles because of it,” she says. “While slowly starting to recover, unemployment is still very high, and Americans are looking to their leaders for help now more than ever." A Chicago federal judge has refused to foreclose a nationwide class action lawsuit accusing the National Association of Realtors and some of the country’s largest real estate brokerages of conspiring to improperly lock in commission rates for real estate brokers and agents, costing homebuyers thousands more than they otherwise might pay if they were allowed to more effectively negotiate the pay earned by their agents.
On Oct. 2, U.S. District Judge Andrea R. Wood denied the attempt by the NAR and its corporate co-defendants to dismiss the antitrust action. The judge said the plaintiffs in the case had done enough so far to support their allegations of a real estate broker “pricing system in which the seller is essentially locked into a buyer-broker commission rate upfront that neither the buyer nor the seller have the incentive or ability to negotiate.” “Each Plaintiff was a home seller required to pay a commission to the buyer-broker for the person who purchased their home,” Judge Wood wrote in her opinion. “But-for Defendants’ conspiracy, each Plaintiff would have paid ‘substantially lower commissions.’” The legal action dates back to the summer of 2019, when a group of seven people who had recently sold homes joined together to sign onto a class action lawsuit against the NAR and four top real estate brokers. Additional named defendants included Realogy Holdings, of Madison, N.J.; HomeServices of America, of Minneapolis; RE/MAX, of Denver; and Keller Williams Realty, of Austin, Texas. Named plaintiffs include Christopher Moehrl, Michael Cole, Steve Darnell, Valerie Nager, Jack Ramey, Daniel Umpa and Jane Ruh. According to court documents, they sold homes in Colorado, Texas, Minnesota, California, West Virginia, Wisconsin and Maryland. The lawsuit was filed in the U.S. District Court for the Northern District of Illinois, because the NAR is based in Chicago. The lawsuit accused the NAR and the brokerages of violating federal antitrust law by using the Multiple Listing Services, much of which is under the control of the NAR, to centralize control of the home buying process, and force home sellers to pay commissions to both their broker and the buyers’ agents. By signing up you agree to receive email newsletters or alerts from Cook County Record. You can unsubscribe at any time. Protected by Google ReCAPTCHA.The lawsuit asserts agents are virtually required to use the MLS when listing homes, thus requiring them to bow to the NAR rules, which are reinforced by the large brokerages, who also assert control over the NAR. The lawsuit accuses the NAR and the brokerage defendants of establishing a system whereby agents representing buyers get paid from the sellers at a rate which they say rarely varies, regardless of the services they actually furnished in the home sale process, or virtually any other variable. The alleged conspiracy results in a system which has “restrained” competition among buyers and sellers, and has allegedly “substantially” inflated the cost of selling homes. The NAR and the brokerages asked Judge Wood to dismiss the lawsuit. They asserted the lawsuit is a “complete mischaracterization” of MLS rules. They said their rules set commission rates to encourage agents for the sellers and the buyers to cooperate, not to force sellers to pay higher rates. The judge, however, said those rules can be read to work together to result in an anticompetitive system, at the expense of home sellers, as alleged in the class action. For their part, the brokerage defendants argued there is no conspiracy. Rather they said each brokerage “was acting in its own rational business interest by requiring franchisees and realtors to join the NAR, local realtor associations, and MLSs, and comply with those entities’ rules.” Judge Wood, however, said the ties between the large brokerages and the NAR run deeper than the defendants let on. And, she said, the “commercial necessity” of the MLS for real estate agents boost the accusations leveled by the home sellers of “an interlinked market in which the NAR and local realtor associations’ market power to run and regulate MLSs is dependent on the Corporate Defendants’ support.” Without access to the MLS, the judge noted, real estate agents can’t sell homes or help buyers purchase them. The judge said the plaintiffs had to this point successfully demonstrated the brokerage defendants’ “conduct deprived the real estate market of independent centers of decision making by effectively concentrating power in the hands of the NAR to set the rules for buyer-broker commissions.” “Moreover, the Corporate Defendants played a key role in maintaining that system by requiring its franchisees and realtors to join the NAR and local realtor associations and abide by their rules. And representatives from the Corporate Defendants implemented and enforced those rules through their leadership roles with the NAR and local realtor associations.” Plaintiffs are represented in the action by attorney Marc M. Seltzer, and others with the firms of Susman Godfrey LLP, of Los Angeles, New York and Seattle; Hagens Berman Sobol Shapiro LLP, of Seattle and Chicago; Cohen Milstein Sellers & Toll PLLC, of Chicago and Washington, D.C.; Handley Farah & Anderson PLLC, of Brooklyn, N.Y., and Boulder, Colo.; Justice Catalyst Law, of New York; Wright Marsh & Levy, of Las Vegas; and Teske Katz Kitzer & Rochel PLLP, of Minneapolis. Defendants are represented by the firms of Barnes & Thornburg LLP, of Indianapolis and Chicago; Foley & Lardner LLP, of Washington, D.C., and Chicago; Holland & Knight LLP, of Chicago and Washington, D.C.; Morgan Lewis & Bockius LLP, of Chicago and New York; Jones Day, of Chicago; and Schiff Hardin LLP, of Chicago. Mortgage delinquencies may remain above pre-pandemic levels until 2022, according to a new forecast from Black Knight.
Although the COVID-19 pandemic affected the housing market similarly to other natural disasters at first, that appears to be changing – suggesting that the pandemic could result in a prolonged period of elevated mortgage delinquencies, according to Black Knight’s latest mortgage monitor report, released today. “After tracking closely to the recovery pattern we’ve seen following natural disasters in early months, the trend lines of COVID-19’s impact on mortgage performance have begun to diverge and indicate a longer recovery period ahead,” a Black Knight spokesperson said in an email to MPA. “In fact, based upon the current 3-month average rate of improvement, delinquencies wouldn’t return to pre-pandemic levels for another 19 months – putting us into March of 2022 before we could see the numbers normalize.” “What’s more, when the first wave of COVID-19-related forbearance plans reach their 12-month expiration period, we would still have a million excess delinquencies,” Black Knight Data & Analytics President Ben Graboske said. “As early-stage delinquencies have already returned to pre-pandemic levels, the bulk of these will be seriously delinquent when the forbearance clock runs out – and serious delinquencies have yet to peak, increasing yet again, albeit more mildly, in August.” Graboske said that while the forecast “may seem to paint a bleak picture for the future,” there were “multiple mitigating factors” that could help prevent an ensuing tsunami of foreclosures. “First and foremost, while recovery has been slow and incremental, the bulk of homeowners who have come out of forbearance are currently performing on their mortgages,” he said. “That’s roughly a third of the 6,1 million homeowners who’ve been in forbearance at one time or another since the pandemic began.” Of those homeowners no longer in forbearance but still past due, the “vast majority” are in active loss-mitigation programs with their lenders, Graboske said. “Just 54,000 loans at present represent significant risk – having left forbearance, are past due and not engaged in loss-mitigation efforts,” he said. “Seventy percent of those were already delinquent in February, before COVID became a factor. Furthermore, American homeowners now have the most equity available to them in history. Of those in forbearance, just 9% have less than 10% equity in their homes, which offers both homeowners and lenders multiple options in lieu of foreclosure.” |
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