Serious delinquencies drop below a key benchmark

The number of borrowers whose payments were 90 days late or more but were not in foreclosure has fallen below 1 million for the first time since May 2020, according to Black Knight.

Serious delinquencies clocked in at 946,000 last month. That’s down from 1,026,000 in November and 2,146,000 in December 2021, but it’s roughly double the historically low levels seen before the pandemic.

The serious delinquency rate is considered a key benchmark for mortgage market distress, and it’s expected to be even more revealing now that most people with coronavirus hardships have exited their forbearance plans and more restrictions have been lifted from foreclosures.

“Foreclosures could move faster in the coming months as the [Consumer Financial Protection Bureau] safeguards expired on Jan. 1, 2022,” the Federal Reserve Bank of Philadelphia noted in its most recent monthly forbearance and delinquency report.

While serious delinquencies managed to drop below 1 million even with some pandemic-related protections rolled back, it’s worth noting that borrowers still are getting some support from beefed-up government-related loss mitigation programs and the Homeowner Assistance Fund. In addition, coronavirus variants like Omicron are still wild cards.

A slight resurgence in new forbearance plan filings was seen in Black Knight’s separate weekly report, which did reflect some restarts, but also a processing lull that typically occurs mid-month.

How seriously-delinquent borrowers who leave these plans will fare when they proceed to loss mitigation will be telling. The Philadelphia Fed has noted that half have exited with no loss mit plans and that trend intensified slightly in its most recent report.

The Federal Housing Finance Agency’s most recent monthly report also showed home-retention activities for mortgages ebbed, although some of that may reflect the fact that the government-sponsored enterprises it oversees have had particularly low forbearance rates that keep falling.

“Initiated forbearance plans decreased 14% from 26,648 in September to 22,890 in October,” the FHFA said in its report. “The total number of loans in forbearance decreased from 320,009 at the end of September to 244,070 at the end of October, representing approximately 0.81% of the total loans serviced, and 34% of the total delinquent loans.”

Completed home-retention actions overall fell to 65,735 from 69,869 during October, 13,831 of which were forbearance plans, down from 14,604 the previous month.

The FHFA also recorded a slight increase in newer delinquencies as longer-term ones have declined, although the latter category remains almost twice as large.

At the end of October, 244,584 loans at the GSEs were 30 to 59 days late, up from 218,894 the previous month. Mortgages late by 60 days or more fell to 467,437 from 508,635.

“The 30-59 days delinquency rate increased to 0.81%, while the serious delinquency rate declined to 1.40% at the end of October,” the FHFA said in its report.

In line with the fact that remaining borrowers in distress tend to have more entrenched and complex hardships, the FHFA also recorded a reduction in the use of deferral plans. Deferrals are used by borrowers who can resume regular payments if they push missed ones to the end of their loans, and generally aren’t an option for those with reductions in income.

“The number of borrowers who received payment deferrals after completing a COVID-19 related forbearance plan decreased 6 percent from 49,140 in September to 45,965 in October,” the FHFA noted.