Key Highlights

  • Mortgage defaults likely to remain limited, according to Black Knight
  • 1 in 10 borrowers in forbearance has less than 10% equity or is underwater

Looking at the some 4M borrowers currently in forbearance due to negative impacts (job/income losses) from the COVID-19 pandemic, approximately one in ten of those borrowers has less than 10% equity in their property or is underwater, according to Black Knight. 

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Almost 80% of homeowners in forbearance have 20% or more equity. This is a very different story from the one told during the Great Recession when about 10M homeowners lost their homes to foreclosure.

Both of these data points indicate that great numbers of homeowners will likely not end up in foreclosure, according to Black Knight president Ben Graboske. Graboske said, “Equity positions among homeowners in forbearance are by and large strong. Just 9% have 10% or less equity – typically enough to cover the cost of a sale of a property – with another 1% underwater on their mortgages.”

This Black Knight analysis of borrowers currently in forbearance falls on the heels of findings just released by ATTOM Data Solutions in its latest Q2 2020 Vacant Property and Zombie Foreclosure Report. According to ATTOM, the total count of properties in the process of foreclosure was down -8.8% from Q1 2020 due to the federal ban against lenders foreclosing on government-backed mortgages until at least June 30, 2020.

The number of “equity poor” forbearance borrowers is highest among loans backed by the Federal Housing Administration and the Veterans Administration. Graboske said, “This segment – which has the highest forbearance rates overall – sees 19% of homeowners holding 10% or less equity in their homes.”

Housing professionals looking past June 30 and the foreclosure/eviction ban, are forecasting a hike in foreclosures once government relief programs have ending.

 

Thanks to HousingWire, Black Knight and ATTOM Data Solutions.

Also read: Fed Predicts Years of High Unemployment, Big Takeaways from ATTOM’s Year-End Sales Report, Home Buying Secret: Winter Can Be The Best Time To Buy!