Black Knight’s latest Mortgage Monitor Report [1]revealed that using Great Recession mortgage performance, an unemployment rate of 15% could result in 3.5 million new mortgage delinquencies.
The unemployment rate of 15% was projected by Goldman Sachs for Q2 2020.
“Trying to gauge the impact of COVID-19 on mortgage performance is as much an art right now as a science,” said Graboske. “The fact is that there is no true point of comparison in the nation’s recent history for analysts to model against,” Black Knight Data & Analytics President Ben Graboske said.
For comparison, of the more than 140,000 seriously-delinquent mortgages caused by the 2017 hurricane season, just 1% of homes were lost to foreclosure or short sale two years after the storms.
Black Knight also said that if 5% of homeowners seek forbearance, servicers would need to advance more than $2.1 billion in principal and interest per month to security holders. If the number of homeowners seeking forbearance rises to 10%, the monthly cost could jump to $4.2 billion.
“The various forbearance programs being offered to borrowers via the recently passed CARES Act, as well as via individual agencies and mortgage servicers, are a key difference today,” Graboske said.
Black Knight also found the purchase demand has been impacted by economic uncertainty and recent social distancing efforts.
After home affordability improved to its strongest level in more than three years, recent jumps in 30-year rates falling below record lows in early March have “significantly shifted the affordability landscape.”
Black Knight said the payment required to purchase the average-price homes has fluctuated by more than 13% over the past two weeks.
The buying power for a prospective homebuyer who qualified for a $1,000-per month mortgage with a 20% down payment rose from $270,000 at the start of the year to $292,000 on March 2 when 30-year rates fell to 3.13%.
However, when rates hit 4.15% two weeks later, the same borrower would have qualified for only a $258,000 home purchase—a $34,000 reduction in homebuying power.