Morning Report: 2/3 of forbearance plans expire this year

Vital Statistics:

 LastChange
S&P futures4,3888.2
Oil (WTI)70.24-1.15
10 year government bond yield 1.17%
30 year fixed rate mortgage 2.96%

Stocks are higher this morning on no real news. Bonds and MBS are up small.

Home prices rose 17.2% in June, according to CoreLogic. This is the highest annual growth rate since 1979. While the lockdowns of a year ago are almost certainly exaggerating the increase, some of the Western states are experiencing eye-popping gains. Idaho, 34%. Arizona 26%. Montana 24%. CoreLogic expects home prices to level out from here, but with the current supply / demand situation that seems unlikely.

The number of loans in forbearance fell from 3.48% to 3.47% last week, according to the MBA. “Forbearance exits remained low, and there was another increase in new forbearance requests, particularly for Ginnie Mae and portfolio and PLS loans. The net result was another slight decline in the share of loans in forbearance,” said MBA Senior Vice President and Chief Economist Mike Fratantoni.

About 65% of forbearance plans are slated to expire this year, according to Black Knight. “As a result, 65% of active plans – representing approximately 1.2 million homeowners – are now set to expire over the rest of 2021, including nearly 80% of all FHA and VA loans in forbearance. Nearly three quarters of a million plans would expire in September and October alone. Over the course of just two months this fall, the nation’s mortgage servicers would have to process up to approximately 18,000 expiring plans per business day, guiding borrowers through complex loss mitigation waterfalls directed by changing regulatory requirements. The operational challenge this represents is staggering, even before noting the oversized share of FHA and VA loans. Given the heightened challenges those borrowers may face in returning to making mortgage payments as compared to those in GSE loans, effective loss mitigation efforts and automated processes become even more critically important.”

Author: Brent Nyitray

In the physical sciences, knowledge is cumulative. In the financial markets, it is cyclical

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