If you like bad news, today’s dire national economic news is just the ticket.
Black Knight released its May 2020 Mortgage Monitor, and it’s ugly out there. Recall that mortgage forbearance under the CARES Act does not cancel the missed mortgage payments, it only delays the payment.
From the report:
- As of April 30, more than 3.8 million homeowners were in forbearance plans, representing 7.3% of all mortgages
- Following April 15 – the point at which late fees are traditionally charged for past-due payments – the daily number of new forbearance requests began to taper off
- New forbearance requests have ranged from 53,000 and 102,000 over the past nine days, but as May 1 mortgage payment due dates approach, Black Knight will continue to monitor any potential second wave
- The slowdown in new forbearance requests has the mortgage market proceeding on pace with Black Knight’s most optimistic scenario forecast, but there is a risk of May-related forbearance activity changing that trajectory
- Despite 30-year mortgage rates returning to near-record lows in mid-April, refinance locks were nearly 80% below their early-March peaks
- The seven-day average of purchase rate locks fell nearly 70% from its peak in early March through mid-April before beginning to rebound over the past week, in a time when seasonal purchase lending is typically ramping up
- With April rate locks likely to close in May, a somewhat conservative 50% COVID-19-related headwind would result in $70 billion in lost purchase closings in May alone
Why might all those refinancings and purchases have vanished? Read on!
New and continued unemployment claims
It’s difficult verging on impossible to qualify for refinancing or a new mortgage if you’re unemployed.
From the Department of Labor:
The total number of people claiming benefits in all programs for the week ending May 2 was 27,263,538, an increase of 1,900,327 from the previous week. There were 1,564,588 persons claiming benefits in all programs in the comparable week in 2019.
Advance unemployment claims (not seasonally adjusted) for California:
|Week of…||Advance||Prior Week||Change|
Also realize that the usual unemployment statistics do not include people receiving Pandemic Unemployment Assistance benefits. These people do not qualify for the usual unemployment safety net programs. Again, from the Department of Labor report:
During the week ending May 2, 27 states reported 6,121,221 individuals claiming Pandemic Unemployment Assistance benefits and 15 states reported 162,727 individuals claiming Pandemic Emergency Unemployment Compensation benefits.
For pretty graphs of ugly statistics, visit Calculated Risk.