Credit Union Mortgage Prospects Rise for 2021

Mortgages have had the largest increase in delinquencies in the pandemic recession, but analysts said they believe most borrowers have been in better shape than expected because of federal relief and loan accommodations.

With Biden in office and all three branches under Democratic control, the prospects for greater relief have risen, which in turn will allow more borrowers to stay current on their payments.

Gavin Harding, a senior business consultant for Experian, said Wednesday that many households that depend on jobs in restaurants and other hospitality sectors are still suffering in the pandemic recession, but many more are faring well.

Among households requesting forbearances, Gavin said significant numbers have not used them, “indicating they have more cash reserves than previously expected and they are not in as dire straits as we would have anticipated.”

On Friday, the prospects for mortgages brightened as the National Association of Realtors reported 5.53 million existing homes were sold in December, up 22.2% from a year ago.

“Home sales rose in December, and for 2020 as a whole, we saw sales perform at their highest levels since 2006, despite the pandemic,” Lawrence Yun, NAR’s chief economist, said. “What’s even better is that this momentum is likely to carry into the new year, with more buyers expected to enter the market.”

Yun predicted a continuation of the strong housing market and overall economic improvement.

“Although mortgage rates are projected to increase, they will continue to hover near record lows at around 3%,” Yun said. “Moreover, expect economic conditions to improve with additional stimulus forthcoming and vaccine distribution already underway.”

The median existing-home price for all housing types in December was $309,800, up 12.9% from a year ago, as prices increased in every region. December’s national price increase marked 106 straight months of year-over-year gains.

Meanwhile, the latest monthly forecast from the Mortgage Bankers Association of Washington, D.C., released Wednesday found greater strength in new home construction and higher prices for existing homes than it expected a month earlier.

Also, yields on 10-year Treasury notes have risen faster than it expected, leading the MBA to lower its forecasts for refinance volume for this year.

“Market expectations of a larger than anticipated fiscal relief package, which is expected to further boost economic growth and lower unemployment, have driven Treasury yields higher the last two weeks,” Joel Kan, the MBA’s assistant vice president of economic and industry forecasting, said in the MBA’s Weekly Mortgage Applications Survey, also released Wednesday.

“After a post-holiday surge of refinances, higher rates chipped away at demand. There was a 5% drop in refinance activity, driven by a 13.5% pullback in government refinances.”

Mortgage delinquency rates have risen since last March as the pandemic recession caused business closures and layoffs to spike.

CoreLogic, an analytics company in Irvine, Calif., said a record amount of home equity and federal loan forbearances have kept many borrowers out of foreclosure, leading to a decline in the foreclosure rate despite high delinquency rates.

The nation’s overall delinquency rate for October was 6.1%, up 2.4 percentage points from a year earlier. The serious delinquency rate – defined as 90 days or more past due, including loans in foreclosure – was 4.1%, up from 1.3% in October 2019 but down slightly from 4.2% in September and 4.3% in August, according to a CoreLogic report released Tuesday.

“After a financially challenging year, the healthy housing market and new stimulus measures are helping borrowers get back on their feet. Given these variables, we should begin to see a reduced flow of homes in delinquency in the coming months,” Frank Martell, CoreLogic’s president/CEO, said.

The MBA’s survey found mortgage rates increased across the board in the week ending Jan. 15, with the 30-year fixed rate rising to 2.92% — its highest level since November 2020. The 15-year fixed rate rose for the first time in seven weeks to 2.48%.

“Market expectations of a larger than anticipated fiscal relief package, which is expected to further boost economic growth and lower unemployment, have driven Treasury yields higher the last two weeks,” Kan said. “After a post-holiday surge of refinances, higher rates chipped away at demand. There was a 5% drop in refinance activity, driven by a 13.5% pullback in government refinances.”

The MBA’s Jan. 20 forecast said it expects total first-mortgage originations this year to be 1.2% lower than it forecast a month earlier. It now expects them to be $2.72 trillion, down 23.9% from a year earlier.

Refinances came in 1% lower than expected for the fourth quarter, and the MBA has dialed back expectations for this year by 3.9% to $1.14 trillion — a 46.7% drop from 2020.

The biggest change was the second quarter, which the MBA lowered 7% to $305 billion. The revised amount is 47.4% lower than a year earlier. If on target, the second quarter would mark the end of the refinance boom, being the first year-ago drop in volume since the first quarter of 2019.

The MBA merely tweaked purchase originations up 0.8% to $1.57 trillion for 2021. The revised amount included the expectation of a 10.5% increase from 2021.

Kan said purchase applications remained strong last week based on current housing demand, rising over the week and up 15% from last year.

“Homebuyers in early 2021 continue to seek newer, larger homes,” Kan said. “The average loan size for purchase loans jumped to $384,000, the second highest level in the survey.”