Mortgage Monitor: Defaults Improve, Cost of Homeownership Rises

Homeownership is getting more expensive, severe defaults are high but improving, borrowers still use forbearance plans, foreclosures are tiny, and homeowner households collectively have billions of dollars in exploitable net worth. Everything is detailed in Black Knight’s monthly Mortgage Monitor data and analysis team, which examines a variety of issues related to the mortgage finance and housing industries.

Cost

Home prices have reached astronomical levels – at nearly 18% year-over-year, house price growth in May eclipsed that in April, which was 14.8%, analysts said by Black Knight.

For the third month in a row, US home price growth reached an all-time high, the researchers say. Black Knight Chairman of Data and Analytics Ben Graboske said growth has been widespread, with appreciation accelerating in each of the nation’s 100 largest metropolitan areas in May, and his team expects that. that prices continue to rise throughout the year.

“Frankly, home values ​​are appreciating at rates we’ve simply never seen before, as low interest rates, ultra-scarce inventory and increasingly competitive buyers combine to create a truly unprecedented market, ”said Graboske.

Not only are the prices of home seekers increasingly out of reach, but principal and interest payments are also up 18% to $ 191 per month and, even with low rates. ‘about 3%, the payment-to-income ratio is rising. It takes 21.3% of median household income to make the monthly payment on the purchase of a mid-priced home assuming a 20% drop.

Late payments

The 1.5% increase in mortgage delinquency in May is only the second since the pandemic recovery began last June and appears to be timing related and likely temporary, according to the report.

“As of the 25th of the month, 91.8% of mortgage holders had made their May payment, the most since the start of the pandemic at that time,” the researchers noted. “This suggests that defaults would have continued on a downward trend without the [Memorial] holidays falling at the end of the month. “

An estimated 7.25 million borrowers have participated in forbearance programs at one point or another throughout the pandemic, representing 14% of all homeowners, reports Black Knight. More than 70% of all participants have since abandoned their plans, while 28% remain in active abstention. In general, Black Knight (who posts weekly forbearance updates) points out that the forbearance landscape is improving, albeit slowly.

The foreclosure activity rate is down 2.5% for the month, hitting a new high. This is due to the moratoria and the forbearance programs.

Options

As home prices skyrocket, options for existing homeowners increase.

“Obviously, as home values ​​rise, so do the levels of available and exploitable equity, which have reached an all-time high of 8 100 billion dollars in the first trimester, ”said Graboske. “In turn, increasing levels of equity provide homeowners with more refinancing options – switching from an FHA loan to a GSE loan, for example, both to reduce the interest rate. ‘a borrower and potentially eliminate mortgage insurance payments at the same time. . “

Another stat to note: overall mortgage debt now represents less than 48% of associated real estate values, with the lowest debt ratio ever recorded dating back to at least 2005.

MBS

Data on mortgage-backed securities from Black Knight showed that Government National Mortgage Association (Ginnie Mae) securities accounted for about a third of agency securitizations leading to the pandemic, but that share has fallen to less than 25% last month. The loss of market share is largely due to the fact that borrowers with higher balances, capital levels and credit scores are more responsive to refi incentives and tend to favor GSE mortgages, according to the report.


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