HUD Articles

The Data & Analytics Division of Black Knight has released its latest Mortgage Monitor Report, which found that just 7% of homeowners in forbearance have less than 10% equity after including 18 months of deferred payments; however, the potential for foreclosure activity persists regardless.

According to Black Knight Data & Analytics President Ben Graboske, the data suggests that the healthy stores of equity in the hands of homeowners currently in forbearance may not be sufficient on its own to ward off foreclosure activity. While homeowners with limited equity were much more likely to be referred to foreclosure during the early stages of the Great Recession, foreclosure start rates on 120-plus-day delinquencies have been relatively similar regardless of equity position from 2010 onward.

"An analysis of our McDash loan-level mortgage performance dataset back to 2007 shows that holding equity in one's home might not be a blanket backstop to 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. But foreclosure start rates on homeowners who were 120 or more days past due have been relatively similar regardless of equity stakes from 2010 on, with borrowers in the strongest positions only slightly less likely to be referred to foreclosure. So, while we may see some variation in foreclosure activity based on the equity levels of borrowers who are unable to return to making payments post-forbearance, those with strong equity won't necessarily be immune to foreclosure referral.”

Black Knight also found that high-equity borrowers were more than 40% less likely to face the involuntary liquidation of their home (via short sale, foreclosure sale, deed-in-lieu, etc.) than borrowers with weaker equity positions.