The mortgage market has been partly
Foreclosure starts have risen to an 18-month high but are still 35% below where they were in the runup to March 2020. That's in part because 70% of loans that are late by 90-plus days are in loss mitigation programs and 58% of those mortgages have 20% equity.
These numbers show that while the share of seriously delinquent borrowers in loss mit is down from its pandemic peak in 2021, it's still higher than before 2020. They also show that
"Strong equity cushions not only provide borrowers incentive to work with their servicers to return to making mortgage payments, they also open up other options," said Andy Walden, vice president of enterprise research strategy, in a press release.
ICE's latest analysis finds that the rate at which borrowers have been tapping equity has been historically low. They've extracted 0.41% of the amount available when the third quarter started, 55% below the average for the last 12 years of the prior interest rate cycle.
"That's equivalent to $54 billion — $250 billion over the last 18 months — in 'missing' withdrawals that might have otherwise stimulated the broader economy," Walden said. (Black Knight noted that this is in line with the Fed's intent to slow inflation.)
Credit tightening contributed to this trend, with ICE finding that loans first-time buyers favor — mortgages that are Federal Housing Administration insured or that the Department of Veterans Affairs guaranteed — had series-high average credit scores in October.
The average FHA score was up 14 points from a year earlier. The average VA score rose 13 points over the past 12 months.
The withdrawal of equity has been limited by credit tightening and elevated interest rates, but some is nevertheless taking place.
Also, some mortgages with long-term late payments are overleveraged.
Around 20% of seriously delinquent borrowers had loans exceeding the value of their homes in October. Another 10% had loans worth less than 10% of the value of their homes.
But overall, just 1.25% of all mortgages were seriously delinquent or in foreclosure.
At 58%, the amount of equity available in seriously delinquent loans isn't quite as strong as it was two years ago, when 64% of such mortgages had 20% equity.
However, home equity levels are still far higher than they were during the Great Recession, when underwriting was very loose and 90% of loans had negative equity, ICE noted.
Weakness in equity levels might be specific to certain regional markets. People who took out mortgages after the recent runup in rates, loans that are particularly old or that have both first and second lien obligations may be more highly leveraged than others.
ICE's data includes information sources it acquired by
