![]() “Although I’m not fond of this phrase, I think it has kind of helped prevent the ‘foreclosure tsunami’ everyone was worried about. “Servicers have told me how useful the homeowner assistance fund has been and that’s pretty much been rolled out in all the states now,” Richard Koch, structured finance director at Fitch, said in an interview. A couple of states, like Illinois and Alaska, have closed their programs, but most remain active, according to the National Council of State Housing Agencies. The fund contains more than $9.96 billion that the majority of states have available to distribute to distressed homeowners for mortgages and other housing needs. In addition to modifications, money available from the Homeowner Assistance Fund has been limiting default risk. Consumers are often quicker to default on bank cards or loan products secured by second liens than first mortgages. The default rate for bank cards was 2.55%. The default rate for home equity loans and lines of credit in June was 0.45%. Both increased 6 basis points compared to May, suggesting an uptick in short-term consumer distress during the month. However, June’s jump in the default rates for second mortgages and bank cards was more pronounced. HSBC ( Charts) announced its bad debt charge last year would be about 1.8 billion higher than expected as problems grew in U.S. The auto loan default rate rose by only a basis point from May to 0.62%. Last week, some serious problems cropped up due to rising defaults. So far the composite default rate that serves as a broader indicator of consumer distress has followed a similar path as the mortgage indicator, rising 2 basis points to 0.53% in June. “If economic conditions deteriorate, there will likely be negative implications for homeowners,” Thompson said in testimony before the House Committee on Financial Services, noting that post-forbearance relief like modifications of loan terms for affordability purposes remain available. “While high rates and prices may push some people out of the market and eventually start putting more noticeable downward pressure on demand, there isn’t much evidence to suggest that we’re going to see a lot of homebuyers suddenly start falling behind or defaulting on their loans in the near future,” says Channel.High home equity levels have insulated many people from the small uptick in default risk, but if rising consumer costs start to affect the economy, it could become more of a concern, Federal Housing Finance Agency Director Sandra Thompson said Wednesday. The majority of people seem capable of keeping up with their mortgage payments, and this is what economists and real estate pros told MarketWatch Picks about the housing market now. ![]() What does this all mean for the housing market?Īt the end of the day, despite a few hiccups here and there, most data indicate that the housing market is doing pretty well, pros say. And foreclosure starts are below pre-pandemic levels, which means that even if a relatively large amount of people are seriously delinquent, many aren’t actively being foreclosed on. “The overall mortgage delinquency rate fell to a new record low and not only that, actually fell 12% from February to March, the largest month-over-month decline in 20 years,” says Channel. What’s more, foreclosure starts - the process of beginning a foreclosure after 120 days of delinquent payments - fell 12% from March. As CoreLogic concluded in February: “The nation’s overall mortgage delinquency rates have improved significantly over the last year … Declines in local unemployment rates, a rapid rise in home prices and demand for housing have helped reduce the overall delinquency rate.”Īnd though the number of borrowers with a single payment past due increased 7.9% in April, that was offset by the fact that the number of borrowers who are three or more payments past due fell 8%. ![]() What’s more, the national delinquency rate - which factors in even someone who is delinquent by a single month - fell in April to 2.80%, marking a new record low for the second consecutive month, Black Knight reveals. borrower, a 10 percentage points increase in loan-to-value (LTV) ratio at. ![]() “Homeowners with FHA loans are more likely to be low-to-moderate income workers, and the pandemic had a greater impact on those homeowners as compared to those with conventional loans.” Keywords: loan defaults, lending standards, residential real estate. When you get into the nitty gritty of this data, you can see that the serious delinquency rate for FHA loans was nearly five times higher than the serious delinquency rate for conventional loans, according to CoreLogic data. ![]() And Black Knight reports they have fallen between 6-12% in each of the past 14 months. Though serious delinquencies are up from a few years back, they were very low anyway before the pandemic, data shows. ![]()
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