Black Knight: Strong Equity Stakes Alone May Not Be Enough to Stave Off Foreclosure Starts, But Will Reduce Inflow of Distressed Properties Into Housing Market
On Oct. 4, 2021, Black Knight (NYSE:BKI) released its Mortgage Monitor Report, revealing insights on borrower equity and foreclosure risks. The data indicates that strong equity alone may not prevent foreclosure starts, as homeowners with significant equity are still vulnerable post-forbearance. Despite this, high equity levels reduce the likelihood of involuntary liquidations by over 40%. However, the housing market shows signs of cooling, with a decrease in annual home price growth from 19.4% to 19%. Rising mortgage payments are now making housing the least affordable since late 2018.
- Homeowners with strong equity are over 40% less likely to face involuntary liquidation.
- High equity may limit losses on distressed mortgages and reduce distressed inflow into the housing market.
- Strong equity does not guarantee immunity from foreclosure referrals, particularly for those unable to make post-forbearance payments.
- The housing market is cooling, with home price growth decreasing, impacting affordability.
- Rising mortgage payments make housing less affordable, requiring 21.6% of median household income, the highest since 2018.
JACKSONVILLE, Fla., Oct. 4, 2021 /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, real estate and public records datasets. Given Black Knight's recent analysis of the strong equity positions of borrowers in forbearance, even when adding 18 months of deferred payments to their debt loads, this month's report explores the relationship between such equity positions and downstream foreclosure start rates and – ultimately – distressed liquidations. According to Black Knight Data & Analytics President Ben Graboske, the data suggests that the healthy stores of equity in the hands of homeowners currently in forbearance may not be sufficient on its own to ward off foreclosure activity.
"An analysis of our McDash loan-level mortgage performance dataset back to 2007 shows that holding equity in one's home might not be a blanket backstop to foreclosure activity," said Graboske. "Borrowers with limited equity were much more likely to be referred to foreclosure during the early stages of the Great Recession than those with strong equity positions. But foreclosure start rates on homeowners who were 120 or more days past due have been relatively similar regardless of equity stakes from 2010 on, with borrowers in the strongest positions only slightly less likely to be referred to foreclosure. So, while we may see some variation in foreclosure activity based on the equity levels of borrowers who are unable to return to making payments post-forbearance, those with strong equity won't necessarily be immune to foreclosure referral.
"The same data also shows that borrowers with strong equity stakes are more than
However, the report also finds that the white-hot housing market, which has driven homeowner equity to record-breaking heights, is starting to show signs of cooling. According to the Black Knight HPI, annual home price growth slowed from an all-time-high of
It now requires
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 combined insight of the Black Knight HPI and Collateral Analytics' home price and real estate data provides one of the most complete, accurate and timely measures of home prices available, covering
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/.
SOURCE: BLACK KNIGHT, INC.
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SOURCE Black Knight, Inc.
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