Auction.com: Most Default Servicers Expect 2020 Foreclosures to Increase
Auction.com, Irvine, Calif., said its 2020 Default Servicing Insights report found while most respondents said they do not expect an economic recession in 2020, two-thirds expect their foreclosure and REO inflow to increase and 89 percent expect an increase in foreclosure and REO inflow from government-insured loans.
The survey of more than 40 of the nation’s largest bank and nonbank default servicing clients, along with representatives from government agencies involved in servicing and disposition of distressed properties, took place between Nov. 19 and Dec. 20, 2019.
A majority of respondents said they expect foreclosure and REO inflow to increase in five of seven U.S. regions. In response, 41 percent plan to price more aggressively to sell to third parties at foreclosure auction in 2020, with the remainder planning either no change in pricing strategy or less aggressive pricing. Additionally, eight out of 10 consider REO holding costs either the primary or an important factor in determining their foreclosure auction pricing strategy.
“Most in the default servicing industry expect government-insured loans to be the primary source of increased foreclosure inflow in 2020, even in the absence of a widespread recession or housing downturn,” said Jesse Roth, SVP of Strategic Partnerships and Business Development with Auction.com. “That’s a rational conclusion given the rising risk profile of FHA-backed loans originated in the last five years.”
By contrast, the Mortgage Bankers Association earlier this month reported mortgage delinquency rates for loans on one-to-four-unit residential properties in the fourth quarter fell to the lowest level since it began tracking such data.
The MBA National Delinquency Survey reported the delinquency rate for one-to-four unit residential properties in the fourth quarter fell to a seasonally adjusted rate of 3.77 percent of all loans outstanding, down by 20 basis points from the third quarter and by 29 basis points from one year ago. The percentage of loans on which foreclosure actions were started in the fourth quarter remained unchanged at 0.21 percent.
But at the recent MBA Servicing Solutions Conference & Expo in Orlando, Fla., MBA Vice President of Industry Analysis Marina Walsh noted despite the record low delinquencies, FHA loans remain particularly vulnerable to market conditions, such as natural disasters. “It takes longer for FHA borrowers to recover from natural disasters, so we tend to see upticks in FHA delinquencies in areas hit by those disasters,” she said.