Housing Finance at a Glance: Monthly Chartbooks
The July 2021 edition of At A Glance, HFPC’s reference guide for mortgage and housing market data, includes updated figures describing first lien origination volume, the share of loans in serious delinquency or foreclosure, spreads on GSE risk transfer securities, and a special feature on loan-level GSE credit data.
The GSE COVID-19 Payment Deferral Program Has Helped More Than 300,000 Homeowners
The Administration recently extended the mortgage forbearance period for federally-backed mortgages. Borrowers who entered forbearance prior to June 30, 2020 may now be in forbearance for up to 15 months, and new borrowers can enter forbearance as late as June 30, 2021. These actions were designed to help borrowers maintain homeownership by giving them more time to recover financially from pandemic-related disruptions.
As borrowers exit forbearance, they need to determine, with their mortgage servicer, how to repay the forborne amount. The GSEs have created a loss mitigation waterfall with a first step of repaying the forborne amount in a lump sum or over a short period. If this is untenable, a borrower can revert to their original payment and move the forborne amount to the end of the mortgage with the mortgage term extended by the number of missed payments. This is, by far, the most popular exit option, and Fannie Mae and Freddie Mac refer to it as the COVID-19 Deferral Program. A mortgage modification will be considered for borrowers who cannot make their old payment, which would further reduce their payment.
Since reaching a peak of 6.4 percent in May 2020, the GSE forbearance rate has fallen to 3.0 percent in February 2021 (see page 24 of this chartbook). About two-thirds of the GSE loans that have been in forbearance have exited the program. Very few of those that have exited are still delinquent or in loss mitigation. A larger share of those that have exited forbearance prepaid their mortgage (14 percent of GSE loans ever in forbearance). The majority of those that have exited forbearance are current, accounting for 47 percent of all GSE loans ever in forbearance, with most of these, or 320,856 borrowers, enrolled in the COVID-19 Payment Deferral program as of January 2021; this accounts for 1.4 percent of all GSE loans.
Although borrowers with the highest score account for half of the COVID-19 Payment Deferral program’s participants, the program has disproportionately helped homeowners with lower FICO scores. The typical deferred amount while in forbearance is small, $6,000, accounting for 2.1 percent of the implied home value at origination. This percentage likely represents an upper bound since the value of most homes has increased since closing.
Across FICO score categories, the median deferred amount among borrowers with the lowest scores, was similar to those with higher scores. After adjusting for implied home values at origination, the median deferred amount for program participants with the lowest FICO scores is modestly above those with higher scores. However, at 2.8 percent, it is well below the pace of house price growth (see page 22 of this chartbook).
The early evidence suggests that the typical deferred amount should not significantly impact the housing equity accumulated by homeowners in the deferral program. However, with the unemployment rate stagnating, and those who are not back on their feet choosing to extend, it is likely that future entrants into the program may have larger amounts of deferred payments relative to the borrowers currently in the program. We will continue to closely track these borrowers, as they may be less likely to take advantage of the COVID-19 Deferral Program, and more likely to require a modification to retain their home.
July 29th Chartbook Call featuring Amy Crews Cutts; Chartbook Slides
April 29th Chartbook Call featuring Dave Stevens; Chartbook Slides
January 28th Chartbook Call featuring Ed Golding; Chartbook Slides
October 29th chartbook call featuring speaker Ed Golding.
July 29 Chartbook call featuring Amy Crews Cutts; Slides from Amy Crews Cutts and Chartbook Slides
January 29th Chartbook call featuring Bob Broeksmit and Mike Fratantoni.
July 2019 (watch the July 29 chartbook call with guest Richard Green)
April 2019 (watch the April 29 chartbook call with guest Dave Stevens)
January 2019 (watch the January 30 chartbook call with guest Dave Stevens)
- Structural barriers to the benefits of homeownership for homeowners of color; and
- The viability of small-dollar mortgages.
We provided valuable evidence on emerging issues, including:
- How to equitably build Black wealth through homeownership;
- Maintaining forbearance while fixing its costs and expanding its reach to unprotected homeowners;
- The implications of proposed GSE reforms, including the FHFA’s proposed capital rule and the CFPB’s proposed QM rule; and
- The OCC’s new regulations to the Community Reinvestment Act.
We are looking ahead to 2021, when we will continue to analyze ongoing issues critical to the health of the housing market, and respond quickly to emerging trends. Among other things, expect to see work from us on these topics in 2021:
- The continued impact of the pandemic on the housing market;
- Reducing the racial wealth gap through affordable housing and homeownership;
- Barriers to homeownership in particular communities; and
- The ongoing housing finance reform debate.
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