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Delinquency rate rises for first time in 9 months

Likely driven by February's shortened month and smaller window for payment processing

After eight consecutive months of improvement, the national mortgage delinquency rate rose in February to 6% from 5.85%, according to a report from Black Knight on Tuesday. The data giant pointed to February’s seasonality as it is a shorter month and ended on a Sunday this year, allowing for fewer days to process payments.

Last month’s uptick was mainly driven by an increase in the number of properties that are in early stage delinquency (30 days or more past due) but are not yet in foreclosure. That figure jumped by 56,000 households in February. The number of loans that were 90 or more days past due but not yet in foreclosure, including those in active forbearance, managed to see a modest decline – down 15,000 properties from January.

At the current rate of improvement – a decline of less than 3% per month – those considered seriously delinquent should fall to 1.8 million by the end of June, and just under 1.7 million at the end of September. It is then that the first wave of forbearance plans are set to reach final expiration under their 18-month forbearance terms, Black Knight said.

Thanks to widespread moratoriums, borrowers have managed to avoid eviction and foreclosures for some time now. Foreclosure starts and sales activity managed another round of historic lows in February with starts down 88% year-over-year and sales down more than 94%.

Prepayment activity, the act of settling a debt or loan in advance of its official due date, also rose in February as well, climbing 8% month-over-month and 110% year-over-year. But Black Knight warned of recent increases in the 30-year interest rate are likely to put downward pressure on prepayment rates in the coming months.

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It is important to note that Black Knight’s delinquency numbers count all homeowners who have missed payments, whether they are in forbearance plans or not. That said, borrowers in forbearance should not have missed payments reported to the credit bureaus by their servicers. 

Previous data released by Black Knight in early March found the monthly rate of decline in forbearances is holding steady at -2%. And just 160,000 forbearance plans were scheduled to expire at the end of February, providing limited opportunity for significant declines in forbearance volumes.

As we approach the one-year anniversary of the CARES Act, new forbearance requests recently dropped to their lowest level since March of 2020, pushing the total number of loans in forbearance down nine basis points to 5.05% of servicers’ portfolio volume, the Mortgage Bankers Association said on Monday.

But the MBA still estimates 2.5 million homeowners are in some form of forbearance.

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