March is typically the strongest month of the year for
mortgage performance, probably because, according to Black Knight the receipt
of tax refunds allows delinquent borrowers to catch up on their payments. However,
last month the delinquency rate rose 3.39 percent, the first time they have
increased in March since the turn of the century. Not even during the Great
Recession was there a March uptick.
The company says that forbearances are included in its
statistics as delinquencies even though, under the CARES Act, they are not
reported as such to the credit bureaus. Along with its regular "First Look" at
mortgage performance, Black Knight also updated its daily forbearance tracking.
The number of mortgages that were 30 days or more past
due but not in foreclosure reached 1.8 million in March, an increase of 55,000
from February. Despite the 3.39 percent change, those delinquencies were down
7.25 percent compared to March 2019.
The uptick in delinquencies, an early warning of the
possible damage we can expect from the COVID-19 pandemic, comes at a time when
most indicators of distress had been declining for years. In March both the
serious delinquency rate and the national foreclosure rate hit record lows. Serious
delinquencies, loans 90 days or more past due but not in foreclosure numbered
406,000, down by 3,000 loans from February and 87,000 compared to the previous
March. Foreclosures were at 1.06 percent those serious delinquencies, down 28
percent month-over-month.
There were 17,800 foreclosure starts during the month,
a 30.48 percent annual reduction, and also the lowest number on record. Black Knight
says that, with a COVID-19 foreclosure moratorium in place, that number should
continue to decline. The number of properties in the pre-foreclosure inventory
was 220,000, 44,000 fewer than in March 2019.
Reflecting the increase in early delinquencies, the
total number of non-current loans in March was 2.13 million, a gain of 37,000
loans month-over-month.
Prepayments jumped by nearly 40
percent in March, driven by record-low 30-year mortgage rates earlier this
year. Of course, stay-at-home orders, economic uncertainty and unemployment are
all likely to impact these numbers moving forward as well.
Black Knight said its McDash Flash
Forbearance Tracker found that, as of April 23, more than 3.4 million mortgages,
6.4 percent of the total, are in forbearance agreements. This is up from 2.9
million a week earlier. These loans represent $754 billion in unpaid principal.
Of the total, 1.573 million loans are backed
by Fannie Mae or Freddie Mac (the GSEs) and represent 5.6 percent of the GSE
servicing portfolio. There are 1.071 million FHA loans in forbearance, 8.9
percent of that total.
Servicers are contracted to advance $2.8
billion of principal and interest payments per month to holders of
government-backed securities on COVID-19-related forbearances and another $1.3
billion for the estimated 740,000 portfolio-held or privately securitized
mortgages.

The Federal Housing Finance Agency
(FHFA) announced earlier this week that servicers of GSE loans will have a four-month
limit on those advances. This could still mean a $7 billion obligation just on
those loans currently in forbearance.
Black Knight CEO Anthony Jabbour, said
the FHFA announcement provides the industry with some much-needed clarity. "Having
an end date - four months - on the period in which servicers need to advance
principal and interest payments on behalf of homeowners in forbearance is
extremely helpful to our servicing clients," he said "Still, even knowing that
time limit, with today's number of forbearance plans, servicers are still
looking at more than $7 billion dollars in advances over those four months. And
the forbearance numbers are climbing steadily, day by day. Clearly, this
remains a challenging situation all around."
Black Knight will take a more
in-depth look at the March mortgage performance data in its Mortgage Monitor.
It will be released on May 4.