Good afternoon —
Two years ago, my husband and I went to Hawaii for an anniversary trip where I signed us up for surfing on Hawaii's famous North Shore. It was about mid-season so the waves were supposed to be manageable, even for the relatively unskilled, which definitely described us. Watching the waves crash against the beach where we had booked lessons, we had our doubts. These were much, much bigger than waves I had experienced before, and the ocean bottom was sharp, volcanic rock.
Our instructor was super positive in a way that only someone who surfs for a living can be. This was the beach where they taught little kids to surf, he assured us. Sure enough, we could see the elementary school where students came here for recess. I tend to be overconfident/foolhardy in these situations, so we took the plunge.
But we emerged an hour later feeling like we had been in a car wreck. And looking like it too.
Why do I share this ill-advised adventure? Because it reminds me of last year about this time when the CARES Act made COVID-related forbearance possible and no one truly knew what was going to happen. 40 million people were out of work...how many of those were going to need forbearance? Was it going to help homeowners or just put off the inevitable — a huge wave of foreclosures that would swamp the housing market?
A year later, we can be as positive as a Hawaiian surf instructor.
Today's MBA forbearance numbers show a decline for the 10th straight week, falling 11 basis points to 4.36% of servicers' portfolio. Ginnie Mae loans fell a whopping 20 basis points to 5.82% ― a massive milestone as this is half the total portfolio share the MBA originally recorded (11.6%) last May. Fannie and Freddie are down to 2.32%.
The MBA now estimates 2.2 million homeowners are in forbearance, less than feared when people started losing their jobs last year. Their Q1 delinquency report shows that the mortgage delinquency rate peaked at 8.22% in the second quarter of 2020 and within three quarters has now dropped by 184 basis points to 6.38%.
It's not all rose-colored sunglasses: more than 47% of borrowers in forbearance extensions are now past the 12-month mark. Those homeowners are likely in serious trouble. But a hot housing market means that they may be able to sell instead of losing the house to foreclosure.
This good news runs counter to the narrative you can find on some mortgage blogs, videos, client notes, etc., where lenders and real estate agents are still talking about that giant foreclosure wave. Some see it as the latest sign of the apocalypse that's going to crash the market, while others predict it will help housing inventory.
I think by the time we come to the end of this COVID-era forbearance period the foreclosure wave will be less like the legendary Hawaiian Banzai pipeline and more like the ones elementary kids (and my husband and I) learn on. Impactful for those in it, but just a ripple in the larger picture.
Until tomorrow —
Sarah Wheeler
HousingWire Editor in Chief
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