Black Knight: At Current Rate of Improvement, Delinquencies Will Remain Above Pre-Pandemic Levels Until 2022; Loss Mitigation and High Levels of Equity Help Mitigate Foreclosure Risk

Rhea-AI Summary

Black Knight, Inc. (NYSE:BKI) released its Mortgage Monitor Report, highlighting COVID-19's impact on mortgage delinquencies. The report indicates a divergence from historical trends, with current estimates suggesting that delinquencies will persist above pre-pandemic levels until March 2022. Despite a prolonged recovery, about a third of homeowners out of forbearance are performing well on their mortgages. Furthermore, high homeowner equity—averaging nearly $125,000—may help mitigate potential foreclosure waves resulting from serious delinquencies, which have not yet peaked.

Positive

• Approximately 33% of homeowners who exited forbearance are performing well on their mortgages.
• High levels of homeowner equity, averaging nearly $125,000, provide options to avoid foreclosures.
• Only 54,000 loans are seen as significantly risky, representing a small fraction of those in forbearance.

Negative

• Delinquencies may remain above pre-pandemic levels until March 2022.
• A million excess delinquencies are expected when forbearance plans expire.
• Serious delinquencies continue to rise, indicating a precarious recovery.

JACKSONVILLE, Fla., Oct. 5, 2020 /PRNewswire/ -- Today, the Data & Analytics division of Black Knight, Inc. (NYSE:BKI) released its latest Mortgage Monitor Report, based upon the company's industry-leading mortgage performance, housing and public records datasets. This month's report found that – after tracking relatively closely to the deterioration and recovery timelines of recent natural disasters – the trend lines of COVID-19's impact on mortgage performance have begun to diverge. As Black Knight Data & Analytics President Ben Graboske explained, while this divergence suggests a prolonged recovery period may lay ahead, there are several mitigating factors which together could help lessen the size of a follow-on wave of foreclosures.

"When COVID-19 first began to impact the mortgage and housing markets, there was no easy historical precedent by which to gauge the fallout, so we looked to mortgage performance in the wake of recent recessions and natural disasters for clues," said Graboske. "And for the first several months of the pandemic, the performance impact of COVID tracked relatively closely to that of major hurricanes. Those trends have since begun to diverge, however, and looking at the 3-month average rate of improvement since May's peak in mortgage delinquencies suggests a longer recovery timeline. At the current rate of improvement, delinquencies would remain above pre-pandemic levels until March 2022. What's more, when the first wave of COVID-19-related forbearance plans reach their 12-month expiration period, we would still have a million excess delinquencies. As early-stage delinquencies have already returned to pre-pandemic levels, the bulk of these will be seriously delinquent when the forbearance clock runs out – and serious delinquencies have yet to peak, increasing yet again – albeit more mildly – in August.

"While this may seem to paint a bleak picture for the future, multiple mitigating factors could help to reduce any resulting foreclosure wave. First and foremost, while recovery has been slow and incremental, the bulk of homeowners who have come out of forbearance are currently performing on their mortgages. That's roughly a third of the 6.1 million homeowners who've been in forbearance at one time or another since the pandemic began. Of those no longer in forbearance but still past due, the vast majority -- some 267,000 -- are in active loss mitigation programs with their lenders. Just 54,000 loans at present represent significant risk – having left forbearance, are past due and not engaged in loss mitigation efforts. Seventy percent of those were already delinquent in February, before COVID became a factor. Furthermore, American homeowners now have the most equity available to them in history. Of those in forbearance, just 9% have less than 10% equity in their homes, which offers both borrowers and lenders multiple options in lieu of foreclosure."

Even when applying distressed valuations to the more than 2.5 million homes either 90 or more days past due or in active foreclosure, the report found that tappable equity hit another record high in Q2 2020 as home prices continued to rise across much of the country. In total, nearly 45 million homeowners have tappable equity in their homes, the largest volume ever. The average homeowner now has nearly $125,000 in tappable equity; an increase of more than $3200 from last year – also a record. These strong equity positions help to provide a backstop to elevated delinquency levels and slow recovery from COVID-19-related impacts. Much more detail can be found in Black Knight's August 2020 Mortgage Monitor Report.

About the Mortgage Monitor
The Data & Analytics division of Black Knight manages the nation's leading repository of loan-level residential mortgage data and performance information covering the majority of the overall market, including tens of millions of loans across the spectrum of credit products and more than 160 million historical records. The Black Knight HPI is one of the most complete, accurate and timely measures of home prices available, providing essential micro-level valuation data by covering nearly 90 percent of U.S. residential properties at the ZIP-code level. In addition, the company maintains one of the most robust public property records databases available, covering 99.9% of the U.S. population and households from more than 3,100 counties.

Black Knight's research experts carefully analyze this data to produce a summary supplemented by dozens of charts and graphs that reflect trend and point-in-time observations for the monthly Mortgage Monitor Report. To review the full report, visit: https://www.blackknightinc.com/data-reports/

About Black Knight
Black Knight, Inc. (NYSE:BKI) is an award-winning software, data and analytics company that drives innovation in the mortgage lending and servicing and real estate industries, as well as the capital and secondary markets. Businesses leverage our robust, integrated solutions across the entire homeownership life cycle to help retain existing customers, gain new customers, mitigate risk and operate more effectively.

Our clients rely on our proven, comprehensive, scalable products and our unwavering commitment to delivering superior client support to achieve their strategic goals and better serving their customers. For more information on Black Knight, please visit www.blackknightinc.com/.

For more information:
Michelle Kersch	Mitch Cohen
904.854.5043	704.890.8158
michelle.kersch@bkfs.com	mitch.cohen@bkfs.com

 

 

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SOURCE Black Knight, Inc.

FAQ

What are the key findings of Black Knight's October 2020 Mortgage Monitor Report?

The report highlights a divergence in COVID-19's impact on mortgage delinquencies, indicating they may remain above pre-pandemic levels until March 2022.

How much equity do homeowners have according to the latest Black Knight report?

Homeowners have an average of nearly $125,000 in tappable equity, the highest recorded so far.

What percentage of homeowners have performed well after exiting forbearance?

Approximately 33% of homeowners who exited forbearance are currently performing well on their mortgages.

What is the projected timeline for mortgage delinquencies according to Black Knight?

Delinquencies are projected to remain above pre-pandemic levels until March 2022.

How many loans are considered significantly risky in the report?

Currently, only 54,000 loans are viewed as significantly risky among those past due and out of forbearance.