Black Knight, Inc.’s recent Mortgage Monitor Report showed the impact of expanded, complex forbearance expiration times by government agencies and offered an overview on the homeowner assistance funds from the American Rescue Act.
“Prior to the agencies issuing clarifying guidance on allowable forbearance periods, some 950,000 plans were set to expire over the final six months of the year – representing about half of all loans in forbearance,” Black Knight Data & Analytics President Ben Graboske said in a release. “That estimate assumed a blanket 18-month maximum allowable forbearance period.
“However, now we have detailed matrices of differing forbearance periods across the various agencies,” he added. “Depending upon the specific agency and when forbearance was initially requested by the homeowner, a plan can have a 6-, 12-, 15- or 18-month limit. Assuming borrowers stay in for the maximum allowable term, this means plans that started as much as seven months apart are now scheduled to expire simultaneously, frontloading expirations of forbearance plans sooner than estimated.”
Graboske further explained how 65 percent of active plans (about 1.2 million homeowners) are set to expire before the end of 2021. This includes nearly 80 percent of all FHA and VA loans in forbearance. Of these plans, almost 750,000 are set to expire in September and October alone, leaving the nation’s mortgage services to process up to about 18,000 expiring plans per business day.
“The operational challenge this represents is staggering, even before noting the oversized share of FHA and VA loans,” he said. “Given the heightened challenges those borrowers may face in returning to making mortgage payments as compared to those in GSE loans, effective loss mitigation efforts and automated processes become even more critically important.”
The report also showed past-due principal, interest, taxes and insurance payments (PITI) have increased by $32 billion since the onset of the pandemic. Homeowner assistance funds, more than $9 billion, have been allocated as part of the American Rescue act to assist with these past-due payments.
If the funds were put entirely toward the pandemic-related, past due mortgage payments, 30 percent of missed PITIs would be covered nationwide. However, that percentage does vary from state to state: in some, the states’ minimum homeowners’ assistance funds allocation is more than enough to pay off all the pandemic-related past-due mortgages, while in others it barely covers a tenth of the outstanding volumes.