shape
shape
shape
shape
shape
shape
24 September 2020 / Nathan R. Duvelius

Pandemic Drives Increase in Both Mortgage Delinquencies and Originations

Topics: Real Estate

The latest data from mortgage industry tracker, Black Knight, Inc., shows a 450% increase in the number of mortgages that are at least 90 days delinquent since pre-pandemic levels. At the same time, rates on 30-year loans have dropped below 3% for the first time, resulting in a record-setting amount of new mortgage originations: $1.1 trillion. 

What does this tell us about the economy in this strange new world? Unfortunately, the data reflects an increasing gap between the proverbial “haves” and “have-nots.”

70% of the new mortgage originations have come from refinancing. In other words, those who are financially stable and already have good credit have been able to take advantage of the record-low interest rates in order to refinance their homes. This saved the “haves” hundreds, or even thousands of dollars a year, depending on the principal amount of their loans.

The “have-nots”, however, were not so lucky. More than 11 million jobs have been lost during the pandemic thus far. Those already living paycheck-to-paycheck before the pandemic and with less than stellar credit scores have not had the same opportunity to refinance. Not only were they unable to reduce their mortgage payments, they fell behind. Roughly 2.25 million mortgages are currently at least 90 days behind; the highest level since 2010.

Some of the government’s interventions serve to benefit the already financially stable. Yet, the loss of jobs and the impasse regarding a second aid package adversely affects those who are less so. As COVID-19 keeps affecting our economy, it is likely that we will see these trends continue.

What does this mean for the future? With so many Americans facing the loss of wages, as a result of reduced hours, lenders must be proactive. Rather than waiting for consumers to default, communicating with borrowers now and providing short-term options, such as forbearance agreements and loan modifications, can help the at-risk save their homes while simultaneously allowing lenders to retain borrowers.

Looking even further ahead, lenders need to recognize that some borrowers face long-term or even permanent financial distress due to the loss of their jobs altogether. Lenders can stem the bleeding and preserve asset value by discussing liquidation options, such as deeds in lieu, as alternatives to foreclosure in exchange for maintaining occupancy. By being proactive and communicating with their borrowers during these unprecedented times, lenders can benefit both themselves and those impacted by the pandemic.  Early and frequent conversations with borrowers are key to sustaining those credit relationships.

This blog is not a solicitation for business and it is not intended to constitute legal advice on specific matters, create an attorney-client relationship or be legally binding in any way.

Related News

Insights / 26 October 2020

Equitable Mortgages and Lenders' Due Diligence

After a default, can the lender nevertheless enforce a mortgage through foreclosure if due to an oversight, the mortgage was never recorded and no copy is available? An Ohio Court of Appeals shed light on this issue.
Read More
Alerts / 21 October 2020

A New CFPB Consent Order Will Impact Repossessions and Payment Processing

On October 13, 2020, the Consumer Financial Protection Bureau, (CFPB), issued a Consent Order against an auto lender that will affect how repossessions and payment processing are handled in the future.
Read More
Insights / 2 October 2020

Left in the Dark: Utility Shut-offs Resume Throughout the Country

While a total of 36 states previously barred electricity disconnections during the pandemic, 14 states moratoriums have already expired and the rest are following not far behind. That means, for an estimated 24 million American households, the possibility of their power now being shut off looms.
Read More

Join Our Email List

Get the latest articles and news delivered to your email inbox! 
Subscribe

Contact the Author

Nathan R. Duvelius

Attorney
Contact

Join Our Email List