Monday, April 13, 2020

Black Knight Mortgage Monitor for Febuary; "Unemployment Spike Triggering Surge in Mortgage Forbearance Requests"

by Calculated Risk on 4/13/2020 09:29:00 AM

Black Knight released their Mortgage Monitor report for February today. According to Black Knight, 3.28% of mortgages were delinquent in February, down from 3.89% in February 2019. Black Knight also reported that 0.45% of mortgages were in the foreclosure process, down from 0.51% a year ago.

This gives a total of 3.73% delinquent or in foreclosure.

Press Release: Black Knight: COVID-19 Unemployment Spike Triggering Surge in Mortgage Forbearance Requests; Principal and Interest Advances Could Lead to Servicer Liquidity Challenges

Today, the Data & Analytics division of Black Knight, Inc. released its latest Mortgage Monitor Report, based upon the company’s industry-leading mortgage performance, housing and public records datasets. This month, in light of the growing impact of the COVID-19 pandemic on the economy, Black Knight drilled down into aspects of its extensive white paper exploring the ramifications of this crisis for the real estate and mortgage industries. As Black Knight Data & Analytics President Ben Graboske explained, any attempt to quantify potential delinquencies from the current situation is challenging, as there have been no true corollaries in history.

Trying to gauge the impact of COVID-19 on mortgage performance is as much an art right now as a science,” said Graboske. “The fact is that there is no true point of comparison in the nation’s recent history for analysts to model against. That said, there are some historical clues that can help shed light. In the Great Recession, for example, the number of past- due mortgages tripled over four years, increasing by more than 5.5 million, as the unemployment rate rose relatively sharply from 4.5% in 2006 to 10% by the end of 2009. Today, we’ve seen more than 10 million people file for unemployment since the coronavirus was labeled a pandemic on March 11, which should put the unemployment rate at roughly 9.5%. Using the Great Recession as a point of comparison, Black Knight’s AFT modeling team looked at potential delinquencies under different unemployment scenarios, and at 10%, we could expect 2 million new mortgage delinquencies. That would put the total at 4 million delinquencies with a national non-current rate of 7.5%. If unemployment climbs to the 15% recently projected by Goldman Sachs[1], we could be looking at 5.5 million past-due mortgages. Should unemployment reach the 32% projected by the Federal Reserve Bank of St. Louis[2], the non-current rate could spike to nearly 19%, surpassing what we saw during the Great Recession, with 10 million homeowners past due on their mortgages.
emphasis added
BKFS Click on graph for larger image.

Here is a graph from the Mortgage Monitor that shows the National Delinquency Rate.

From Black Knight:
• As of February, the national delinquency rate was 3.28%; just one month removed from its record low and with the rate of improvement accelerating in recent months

• Likewise, the national foreclosure rate was only 1 BPS above its all-time low and was trending downward heading into 2020

• Foreclosure starts hit their lowest level on record in February as well and were down by some 20% from the same time last year

• While these historically low levels of past due mortgages provide a strong foundation for the market leading up to the COVID-19 pandemic, they also mean that default servicing staff had been greatly reduced in recent years

• This will compound the challenge that servicers face in managing the wave of new forbearance and deferral requests on the horizon in coming weeks/months
The second graph shows the impact of COVID-19 on real estate showings: BKFS
• According to the online home showing service ShowingTime, the number of in-person real estate showings as of March 25 was down nearly 50% from the 2020 peak on March 11

• Likewise, aggregate data from Paragon, Black Knight’s Multiple Listing Service (MLS) platform, shows that as of March 22 online property views by prospective homebuyers were down 24% over the prior two weeks

• While social distancing efforts are likely having an outsized impact on in person showings, the declines in online searches suggest potential trepidation from homeowners about economic uncertainty, rate volatility, and/or job security
There is much more in the mortgage monitor.