People contemplating a home purchase continue to do so as the health crisis dwindles down. While mortgage delinquencies spiked during the first few months in 2020, they inevitably fell throughout the pandemic.
The Mortgage Bankers Association (MBA) recently announced that the delinquency rate on 1-4 unit residential properties decreased to a rate of 4.65% of all loans outstanding by the end of the 4th quarter in 2021.
Although the COVID-19 economic slowdown forced so many out of work, the economy and labor market steadily picked back up. So, does that mean now may be a good time to buy?
Forbearance and Delinquency
The Coronavirus Aid, Relief and Economic Security CARES Act promoted mortgage forbearance by lenders and servicers in every state. Every mortgage backed by the federal government qualified for this pause or reduction in payments for six months or more. Interest still accumulated during this period, so the entire amount owed did not diminish due to forbearance. It is simply pushed off while hard times last.
These measures staved off the usual response to non-payment, including adverse credit reporting and legal action to seize the property. However, such arrangements did not move the loans out of the delinquent column in terms of MBA reporting; rather, they spared distressed borrowers the bitter fruit of delinquency.
Many American homeowners took advantage of this process to help ward off mortgage default while jobs were lost. But the situation improved since.
On a comparative basis, owners in Washington who were behind on mortgage payments represented a very low percentage against the national figures.
Aside from that, the Washington real estate market is one of the hottest in the country, with home prices having skyrocketing year-over-year. Homebuyer hopefuls looking to get into the market may want to consider doing so sooner rather than later to avoid having to pay even higher prices down the road.
Oregon’s recent delinquency rate was among the higher ones in the Pacific Northwest during the pandemic, though not nearly as high as its 2010 record of 9.2 percent in the aftermath of the financial crisis over a decade earlier.
Like Washington State, Oregon’s housing market is very healthy, with home prices having risen 19.7% over the past year.
Idaho distinguished itself as having one of the lowest delinquency rates in the United States.
What, then, is the outlook for Idaho? Right now, Idaho’s real estate market has been sizzling over the past year with home prices having risen 28.1%.
Like other Rocky Mountain and Pacific Northwest states, Colorado’s delinquency rate was in stark relief against national numbers. Like other states in the Pacific Northwest, Colorado saw a marked increase.
However, the market in Colorado has been very healthy and is expected to continue to be healthy througout the remainder of 2022.
Was There Money to Lend?
Liquidity refers to how much cash banks have on hand to lend. As forbearance cases increase, ready cash necessarily decreases because income is reduced. True, it is owed and expected, eventually. Forbearance amounts to essentially an IOU from customer to lender. A problem arises because so many lenders sell their loans to the secondary market (Fannie Mae, Freddie Mac or other investors).
The servicing of the loans is also farmed out; the assigned servicers are then mandated to pass the collected monies (minus their fees) to the investment entities. When servicers see a dramatic drop-off in receipts, they are still nonetheless on the hook with the investors.
Prospective buyers do well to monitor business news closely in order to determine the right time to proceed with buying a home.
Do Delinquencies Lead to More Listings?
Forbearance is ordinarily good for six months and eligible for an additional six-month extension. It is not reasonable, however, to assume there would be additional extensions. Lenders would either have to seize their assets or go out of business.
Distressed homeowners would then have to make a decision about what to do. Some faced the inevitable and put their properties up for sale. Others, on the other hand, stuck it out and risked it.
How a Mortgage Lender Can Help
Lender representatives are not financial advisors but they can speak for their own institutions. How they evaluate customers and what institutions they sell to are pertinent and timely questions. Speak to one today to see if now is the time to finance a new home.
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Since 1992, Sammamish Mortgage has helped many in the Pacific Northwest buy their homes. If you want mortgage financing, Sammamish Mortgage can help. We offer mortgage programs in Washington, Oregon, Idaho and Colorado. If you’d like, you can Contact us with any mortgage-related questions. You can also View Rates directly on our site or Apply Instantly if you’re ready. If you want to get a Rate Quote instantly, we can also help.