Foreclosures

Donna Ferrato stopped paying her mortgage more than 15 years ago, yet she's still living in her Manhattan condo. Her case is part of a broader power struggle between mortgage lenders and homeowners in New York state.

Foreclosure filings increased 7% in January from December, which could be a housing market starting to experience trouble, or a post-holiday return to normal.

The original lawsuit was one of several filed in 2014 in a coordinated effort among federal and state regulators aimed at fraudsters trying to cheat distressed mortgage borrowers.

But the volume of activity for distressed properties is still lower than the historic norms, Attom Data Solutions said.

Roughly 24,000 people had new foreclosures listed on their credit reports in the first quarter, up from about 9,000 three months earlier, a Federal Reserve Bank of New York report says. States are trying to cushion the blow on homeowners now that many pandemic-related federal protections have ended.

The Servicemembers Civil Relief Act includes extra protections aimed at preventing foreclosure for homeowners in the military.

The agency developed measures taking effect Aug. 31 that, among other things, will allow lenders to prioritize foreclosures of the most impaired loans and then focus on modifying salvageable ones.

The plan aims to cut monthly payments by roughly 25% for homeowners in government-backed mortgages who are negatively impacted by the pandemic.

The Consumer Financial Protection Bureau issued a temporary final rule that allows mortgage servicers to initiate foreclosures on abandoned properties and certain delinquent borrowers, but it also outlined additional measures that shield distressed homeowners.

Only 0.9% of mortgage borrowers are currently at least 90 days delinquent. That figure could rise as high as 3.8% once pandemic-related deferrals lapse — still well below the 6% mark reached after the Great Recession, according to research by the New York Fed.

Most of the activity covered vacant and abandoned properties or commercial loans, according to Attom Data Solutions.

Federal Housing Finance Agency Director Mark Calabria said he wants to work with the consumer bureau on an “exit strategy” for borrowers approaching the end of their forbearance periods.

One official at the bureau said this fall could be an “unusual point in history” for the mortgage market as delinquent borrowers exit forbearance plans. The agency proposed new steps for servicers to help consumers stay in their homes.

The decision provides more clarity to noteholders in the state about when the six-year statute of limitations to bring a foreclosure action begins.

While the Mortgage Bankers Association hailed the move, some experts say it could negatively impact housing inventory.

Commercial real estate portfolios have held up better than expected during the pandemic. But rising delinquencies and fears of a delayed economic recovery are renewing questions about credit quality.

The percentage of seriously delinquent loans hit 5.8% in the third quarter, up from 1.5% a year earlier but down from 6.8% in the second quarter.

The agency reported signs of stress on the credit quality in residential loans serviced by seven large banks as a result of the COVID-19 pandemic.

Both the Federal Housing Finance Agency and Federal Housing Administration are extending relief for homeowners and renters due to the pandemic crisis.

Dana Wade, a former OMB official, says a strong capital footing will help the Federal Housing Administration weather an uptick in delinquencies and ensure the mortgage market is viable once the economy recovers.