A Slow Wind Down for 2022
A Slow Wind Down for 2022
We expect 2022 to be a year of transition for the mortgage industry, with a slow wind down of mortgage forbearances well into the fourth quarter of the year. We also recognize the possibility of continued forbearance and foreclosure delays, depending on the trajectory of the pandemic and other factors. (For example, on December 22, 2021, President Biden announced that he was extending the student loan payment moratorium from February 1 to May 1, 2022.)
Regardless of the macro environment, we will need to work through a substantial number of forbearances. Our internal data reveals that about 10% of those in forbearance are current on their loans. They are excellent candidates for structuring a workout. Other homeowners, according to our data, may be at higher risk for foreclosure. Some have 18 to 24 months or more of delinquency. While our goal is to move everyone at risk into a loan workout, we believe a small percentage of these homeowners may enter foreclosure in the next six months.
Our Loss-Mitigation Workout Strategy
We are continuing to work with investors, our clients and their homeowners to make sure there is a smooth and thoughtful workout process. In 2021, we worked through 30,000 deferments and regularly review our loss-mitigation processes to uncover additional improvements. To ensure that Cenlar is maximizing homeowner assistance, we have enhanced procedures for our Homeowner Advocate program [see adjacent story].
We’re also trying to stay ahead of the curve by anticipating borrower behavior. Our analysts have spent a lot of time trying to understand and plan for how homeowners might enter and exit forbearance, and under what circumstances they would extend forbearance. What percentage of borrowers, for example, will not do anything once the forbearance expires without any contact? Or how many borrowers will go from a forbearance into a streamlined deferment? It’s not a perfect science, but we are testing various scenarios to prepare for how borrowers might react under certain economic conditions.
Overall, we believe most homeowners will get back on their feet. The housing market and the economy are on a stronger footing than what we saw during the Great Recession. Yet there are still nearly 700,000 more seriously delinquent mortgages (including those in active forbearance plans) than there were prior to the pandemic, according Black Knight’s Mortgage Monitor.
We’re determined to help every homeowner affected by the pandemic. Our focus begins with a strengthened loss mitigation team, an enhanced risk management process and greater reliance on new technologies.
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