According to CNBC, roughly 7.25 million homeowners have entered into forbearance programs at one point or another during the COVID crisis — roughly 14% of all homeowners in the US. Today, 28% of those homeowners — 2 million or so — remain in active forbearance. And out of the 146,000 plans reviewed this week, 44,000 homeowners left forbearance, while the plans of 102,000 were extended.
The nation’s mortgage servicers are gearing up for the biggest wave of delinquent loans since the subprime mortgage crisis, but this time they say they are ready.
The U.S. Commerce Department said sales of new houses have dropped 5.9% on an annualized basis. Home prices are at record high. The National Association of Realtors said sales of existing houses have declined four months in a row. Consumer confidence has declined. Inflation is rising. Commodity prices climbed as demand surged, driving the cost of new houses higher. Sales of existing houses declined in all regions except the Midwest in May, the National Association of Realtors, a Washington-based trade group, reported. The median price for existing housing of all types in May was $350,300, up 23.6% from the same period a year ago. Total housing inventory was 1.23 million units in May, up 7% from April’s total, but down 20.6% from one year ago. The National Mortgage Bankers Association, a Washington-based trade group, said loan applications decreased 6.9% for the week ended June 25 from the previous week to the lowest level in about 18 months. The average interest rate for a 30-year fixed-rate mortgage backed by the Federal Housing Administration dipped to 3.19% from 3.21%.
The math on all of this is that the first round of homeowners whom took the forbearance are now entering into their last quarter of postponing the inevitable. And multiple waves of these homeowners will begin to hit their maximum of 18 months of no payments.
And while many are lauding the Consumer Financial Protection Bureau’s (CFPB) Final Rule on Regulation X which postpones foreclosures through 31 December 2021, the reality is that it is only prolonging the collapse. When coupled with the final CDC Moritorium extension through July and that imposed by Fannie Mae through September, it is fair to say that the days are numbered on the artificially high valuations created as a byproduct of the government smokescreen created at the behest of their corporate masters. More on point, though, with federal courts ruling against governors whom are attempting to suspend federal unemployment, it is looking like the perfect storm is brewing for October.
This week and next, a total of more than 350,000 borrowers will be reviewed for extension or removal from forbearance, according to Black Knight. Of the 146,000 plans reviewed this week, 44,000 homeowners left forbearance, while the plans of 102,000 were extended. With roughly two-thirds of borrowers remaining in forbearance, Black Knight estimates that 575,000 plans will expire in September and the beginning of October, meaning mortgage servicers will be facing the daunting task of dealing with about 15,000 troubled loans per day.
The key number to look at is 15,000 troubled loans per day. Even in the best of times, there is no way to marshal such a labor force to be able to service at those levels for prolonged amounts of time. Part of it is attrition and the other part is that the technology isn’t there — at least not on the National Association of Mortgage Field Services (NAMFS) member side. Don’t get me wrong, handling 15K per day isn’t that much of a feat. The issue that presents is that you are at 90K in the first week. And those continue to spiral upward until you hit, at minimum, 1.5 Million. As each one requires the inspector first, the Field Service Technician next, and the routine services ongoing, you are easily at 270K per week by the first month. There simply isn’t enough manpower whom are willing to perform $3 inspections and wait on their pay for 60 days — provided that the NAMFS member doesn’t seize it under a charge back. I suppose it bodes well for Labor — if Labor believes that volume will make up for pricing. That has been the historical madness and I see no reason why it would change.
