Many troubled loans that never got forbearance pre-date 2009

The share of mortgages over 90 days in arrears and never on hold is high, but many of them had problems before the pandemic, according to the latest report from the Federal Reserve Bank of Philadelphia.

Sixty-three percent of the 487,976 badly delinquent mortgages that are not in loss mitigation have never been forborne, but 60% of those loans were pre-2009 originations, according to the analysis of Black Knight data by the Philadelphia Federal Reserve’s risk assessment, data analysis and risk analysis. Research group.

The finding suggests that the high share of seriously delinquent borrowers without forbearance or other hardship accommodations may have more to do with the Great Recession than the pandemic.

“A lot of these loans had probably been negotiated before, so loss mitigation may not have been an option,” the report said.

Borrowers get some relief from historical loan performance issues after a period of time. Defaults, for example, typically disappear from credit reports after seven years (even when CARES Act Rules are not in effect) and generally result in higher scores that improve consumers’ borrowing capacity. But some borrowers whose mortgages were taken out before repayment capacity requirements were established have had long-term financial difficulties due to the Great Recession housing crash. Some of these loans have remained unpaid due to long foreclosure times in highly regulated states where foreclosure must be processed through the court system.

The report also reaffirmed that even in the universe of 434,803 borrowers who exited forbearance and entered loss mitigation, the number of people who don’t pay remained high, at 72% of this group. However, the researchers also noted that the number represents a small share of the 8.55 million borrowers who have previously been forbearant. Almost three-quarters of this group had either returned to performing status or had paid off their loans by March 7.

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