FHFA Extends Temporary Flexibilities as Market Shows Positive Signs
Written By: Joel Palmer, Op-Ed Writer
There were a number of signals this week that the housing and mortgage markets are weathering the COVID-19 pandemic.
Black Knight, a provider of integrated software, data and analytics used in the business processes across the homeownership lifecycle, reported in its latest Mortgage Monitor Report, that forbearance volumes fell for the first time since the crisis during the week between May 26 and June 2.
“The first decline in the number of homeowners in active forbearance volumes is undoubtedly a good sign, particularly coming as it does on the heels of an overall trend of flattening inflow,” said Black Knight Data & Analytics President Ben Graboske.
The company also reported that nearly half of homeowners in forbearance on April 30 made their April mortgage payments. Plus, nearly 80 percent of homeowners in forbearance have 20 percent or more equity. This, according to the report, provides homeowners, servicers and regulators with multiple options for helping to avoid downstream foreclosure activity and default-related losses.
CoreLogic’s latest Home Equity Report showed that U.S. homeowners with mortgages saw their equity increase by 6.5 percent year-over-year in the first quarter of 2020. The share of homes with negative equity fell to 3.4 percent in the first quarter.
“The pandemic recession will likely lead to price declines in many areas during the next year and weaken home equity gains,” said Dr. Frank Nothaft, chief economist for CoreLogic. “However, price declines will be far less than those experienced during the Great Recession.”
Also last week, Fannie Mae released its Home Purchase Sentiment Index for May. The report show potential buyers and sellers being slightly more optimistic in May after the index hit an all-time low in April.
Even with a dearth of potential home buyers, mortgage lenders still have a sizable market of potential refinances. Because of mortgage rates hovering near all-time lows, Black Knight reports there are approximately 14 million borrowers who could save at least 0.75 percent on their current interest rates by refinancing and who also meet eligibility criteria.
Even with the positive market signs, the Federal Housing Finance Agency announced last week that it is extending several temporary provisions designed to help borrowers during the pandemic. The following provisions offered by Fannie Mae and Freddie Mac have been extended to at least July 31:
Alternative appraisals on purchase and rate term refinance loans
Alternative methods for verifying employment before loan closing
Expanding the use of power of attorney and remote online notarizations to assist with loan closings
Authority to purchase mortgages in forbearance.
Some of the negative market indicators reported last week include:
Only 22 percent of those in forbearance as of May 26 have made their May payments, signaling a likely rise in the national delinquency rate.
Despite the increase in home purchase sentiment, only 52 percent of Americans say it’s a good time to buy a home. Only 32 percent believe it’s a good time to sell.
About the Author
As an NAMP® Opinion Editorial Contributor, Joel Palmer is a freelance writer who spent 10 years as a business and financial reporter and another 10 years in marketing for the insurance and financial services industries. He regularly writes about the mortgage industry, as well as residential and commercial real estate, investments, and retirement income planning. He has also ghostwritten books on starting a business, marketing, and retirement income planning.
