“Homeowners are sitting on more than $10 trillion of tappable equity - a record,” Harker told a live-streamed discussion on the US economy and inflation. “Still, nearly one million mortgages are seriously delinquent, split evenly between those classified by servicers in loss mitigation and those not in loss mitigation.”
Harker said most borrowers who remain seriously delinquent and not in loss mitigation, never entered forbearance -, the process where a mortgage servicer or lender allows one to pause or reduce mortgage payments for a limited time in order to build back finances.
“Many were in nonpayment before the pandemic struck, creating a dilemma for policy-makers,” Harker said, referring to delinquencies that began even before the COVID-19 outbreak in March of 2020.
Of borrowers classified as being in loss mitigation - the process where lenders work with borrowers to avoid foreclosure - three-quarters were still in process and had not, as of yet, resumed timely payments.
“Black and Hispanic borrowers have much higher shares of nonpayment - either being in forbearance or delinquency,” Harker said, breaking down delinquencies by demographic groups. “Interestingly, just as the unemployment rate has returned to pre-pandemic levels, the number of delinquent mortgages has also returned to pre-pandemic rates.”
Dire US housing shortages since the financial crisis of 2007-2008, compounded by the coronavirus outbreak in the past two years, have led to a scramble among buyers, triggering record high prices.
To aggravate the rush for homes, a string of expected rate hikes by the Federal Reserve this year has worsened the race among first-time buyers eager to lock in before mortgages get costlier. The central bank raised key US lending rates by a half percentage point last week in its first pandemic-era hike, and is expected to approve as many as six more increases this year.
Mortgage rates climbed past 4% for the first time since May 2019, data from Freddie Mac, the federal home loan mortgage corporation, showed. The 30-year fixed-rate mortgage averaged 4.16% in the week ending March 17, up from 3.85% the week before, according to Freddie Mac data.
Prices of existing homes have fallen from June's median high of nearly $363,000 to $357,300 in February, but the combination of higher mortgage rates and tight supply still made it hard for some buyers to compete, realtors have reported.