Strong equity investments alone may not be enough to prevent foreclosure starts, but will reduce the influx of distressed properties into the housing market.


– Although Black Knight’s research shows that only 7% of forborne homeowners have less than 10% equity after including 18 months of deferred payments, the potential for foreclosure activity still persists.

– While homeowners with limited equity were much more likely to be referred to foreclosure during the early stages of the Great Recession, the early foreclosure rates on defaults over 120 days were relatively similar regardless of the equity situation from 2010

– However, high principal borrowers are more than 40% less likely to face the involuntary liquidation of their home (via a short sale, foreclosure sale, deed, etc.) than borrowers with weaker capital positions

– Even among borrowers with a combined loan-to-value ratio of less than 60%, 30% of those who were foreclosed ended up facing involuntary liquidation, suggesting that many of those who did might sell to avoid losing their home to foreclosure don’t always do so.

– To further complicate matters, the white-hot housing market that led to an increase in equity stakes thanks to rising home values ​​has started to show signs of cooling, albeit slightly

– Annual home price growth slowed from an all-time high of 19.4% in July to 19% in August, marking the first decline in the annual appreciation rate in 15 months, with daily tracking data for September suggesting that a new cooling is underway the way

– This may turn out to be good news for potential buyers, as the monthly payment required to buy a mid-priced home with a 20% fixed rate loan down over 30 years is the highest since the end of 2007, despite historically low interest rates. rates

JACKSONVILLE, Florida, October 4, 2021 / PRNewswire / – Today, the Data & Analytics division of Black Knight, Inc. (NYSE: BKI) released its latest Mortgage Monitor report, based on industry-leading mortgage, real estate and the public records of the company. Given Black Knight’s recent analysis of the strong equity positions of forbearers, even adding 18 months of deferred payments to their indebtedness, this month’s report explores the relationship between those equity positions and downstream foreclosure start rates and – ultimately – distressed liquidations. According to the president of Black Knight Data & Analytics Ben Graboske, the data suggests that healthy reserves of equity in the hands of currently forborne homeowners may not be enough on their own to stave off foreclosure activity.

Black Knight, Inc. logo (PRNewsfoto / Black Knight, Inc.)

Black Knight, Inc. logo (PRNewsfoto / Black Knight, Inc.)

“An analysis of our mortgage performance data set at the McDash loan level through 2007 shows that owning home equity may not be a general safety net for foreclosure activity,” said Graboske. “Borrowers with limited equity were much more likely to be referred to foreclosure during the early stages of the Great Recession than those with strong equity positions. as of 2010, borrowers in the strongest positions were hardly less likely to be subject to foreclosure. , those with strong equity will not necessarily be immune to a foreclosure referral.

“The same data also shows that borrowers with large equity holdings are more than 40% less likely to face involuntary home liquidation than borrowers with lower equity positions, both limiting potential losses on these mortgages and troubled entries into the housing market. , even among borrowers with 40% equity interests who are affected by foreclosure, some 30% in recent years have lost their homes as a result of foreclosure sale, short sale, deed in lieu, etc. What the data doesn’t tell us is why so many of the people who could avoid an involuntary liquidation by selling through traditional channels just don’t end up doing it. Whether this is due to a lack of understanding of their equity positions or the foreclosure process in general is unclear. to make their payments, this presents a significant challenge for the industry: how to educate struggling homeowners about post-forbearance, foreclosure and – if necessary – home sale processes, to limit unnecessary stress on homeowners and in the market. “

However, the report also finds that the white-hot housing market, which has pushed homeowners’ equity to record levels, is starting to show signs of cooling. According to the Black Knight HPI, annual home price growth has slowed from an all-time high of 19.4% in July to 19% in August, marking the first observed decline in the annual appreciation rate in 15 months. Daily tracking data from the company’s Collateral Analytics group also suggests further cooling in September. Any slowdown in appreciation will likely be welcomed by potential buyers, who have seen the monthly payment required to buy a mid-priced home with a 20% drop in the 30-year fixed rate mortgage increase by almost 20%. (+ $ 210) during the first nine months. 2021. This brings the average monthly mortgage payment to its highest level since late 2007.

It now takes 21.6% of median household income to make the monthly mortgage payment on the average home purchase, making it the least affordable home it has ever been since 30-year rates went down. nearly 5% at the end of 2018. Since the Great Recession, home price growth has started to slow when these payment-to-income ratios hit around 20.5% or more, but low inventory levels in recent months have resulted in record growth in home prices, even with a tightening affordability. Any further rate hikes – like those seen the week after the Federal Reserve’s tapering announcement – will only exacerbate the affordability side of the equation. For example, if house prices and incomes held up, but interest rates rose to 3.5%, the average monthly payment would increase by more than $ 100 and home affordability would hit a 12-year low. At 4%, the payments-to-income ratio would climb above its pre-Great Recession average (1995-2003). If rates rose to 5% as at the end of 2018, it would be necessary $ 380 (+ 29%) more per month to buy a house at the average price than today, affordability reaching all-time low levels outside of 2004-2008. Much more detail can be found in Black Knight’s August 2021 Mortgage monitoring report.

About the Mortgage Monitor
Black Knight’s Data & Analytics division manages the leading national repository of residential mortgage-level loan-level data and performance information covering the majority of the global market, including tens of millions of loans across the spectrum. credit products and over 160 million historical records. . The combined home price and real estate data overview from Black Knight HPI and Collateral Analytics provides one of the most comprehensive, accurate and timely home price metrics available, covering 95% of US residential properties up to level. postal code. In addition, the company maintains one of the strongest public property records databases available, covering 99.9% of the U.S. population and households in more than 3,100 counties.

Black Knight’s research experts carefully analyze this data to produce a summary supplemented with dozens of tables and charts that reflect trends and point observations for the Monthly Mortgage Watch Report. To view the full report, visit: https://www.blackknightinc.com/data-reports/

About Black Knight
Black Knight, Inc. (NYSE: BKI) is an award-winning software, data and analytics company that drives innovation in the mortgage lending and services and real estate industries, as well as in capital markets and secondary. Businesses leverage our robust integrated solutions throughout the homeownership lifecycle to help retain existing customers, gain new customers, mitigate risk and operate more efficiently.

Our customers rely on our proven, comprehensive and scalable products and our unwavering commitment to providing superior customer support to achieve their strategic goals and better serve their customers. For more information on Black Knight, please visit www.blackknightinc.com/.

SOURCE: BLACK KNIGHT, INC.

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SOURCE Black Knight, Inc.

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