November 2021 – Page 2

Honor In Data & Analytics

by Carole VanSickle Ellis
Comment Off
610 views

Black Knight is Dedicated to Giving Investors the Most Transparent Market Possible By Carole VanSickle Ellis In Arthurian legend, the recurrent motif of the Black Knight is brave, exceptionally strong, and highly dynamic. In the modern day, the Army West Point Black Knights represent the United States Military Academy and prize similar character traits including courage, justice, mercy, generosity, faith, nobility, and hope. While the archetype may be centuries old, Black Knight Inc. chairman emeritus Bill Foley confidently chose the name to represent the values of the company in 2014, explaining his vision for the business included a reflection of the values of his alma mater, West Point, in the company’s business practices. In a modern world where data is constantly manipulated, adjusted, and curated until many investors find themselves unable to trust even the most basic of metrics, the property data and analytics provider finds that a “code of honor” in the industry is more important than ever. “People need property information, property data, and products related to that information whether in the form of valuation tools, risk management tools, decision-making tools or just raw data to feed into models and analytics,” explained Richard Lombardi, senior vice president of data strategy and innovation at Black Knight Inc. “Black Knight is the leader in providing that data and helping clients and consumers understand it.” Because Black Knight’s property data database covers 99.9 percent of the U.S. population and households and every record is updated and verified regularly, the company is not just a source of information for individual investors and investment firms; it also provides the raw data used across thousands of specialized service and analytics platforms across all sectors of real estate. In order to serve its broad spectrum of clients in extremely customized ways, Black Knight is divided into four divisions: Origination Technologies, Servicing Technologies, Secondary Markets, and Data & Analytics. The company’s Data & Analytics group, in which Lombardi works, uses the conglomeration of information to help clients make their own specific projections about markets and strategies as well as identify emerging trends that could affect future business. While it might seem like a simple process since much of that data is available in the public record, Lombardi emphasized Black Knight systems must work in perfect accord in order to generate actionable data and datasets. “We go to more than 3,000 counties and confirm that more than 3,000 different sets of data match together,” he explained. “We are not just licensing that data to clients; we are standardizing it, cleansing inaccuracies, and matching it back so that all the different points related to a property that come from hundreds of different sources are matched together and verified.” Clients use this information for a vast array of purposes, including analytics, modeling, scoring, and valuations within their own businesses, evaluating existing and potential economic impact, and tracking commercial trends. “Real estate touches nearly every aspect of the market and economy,” Lombardi said. “You can use information about specific properties and groups of properties to understand what is going on in the larger market and other market sectors. Our data is even used in making insurance decisions, implementing marketing strategies, and creating video games,” he added. Drawing Out the Data Story With so much data to work with, clients can easily find themselves overwhelmed with information. That is where Julian Grey, executive vice president of Black Knight’s Data & Analytics division, comes into the picture. Her team deals with the evolving and complicated processes associated with analyzing and drawing actionable conclusions from datasets in ways that still permit the clients to draw their own conclusions. “Investors trying to find insight within data are really looking for a ‘story’ that can help them decide on an action to create a desired return,” Grey explained. “We knew early on that we needed advanced platforms to support the consumption of advanced data and analytics, but they simply did not exist in the form we needed. So we built one.” Black Knight’s Rapid Analytics Platform is the company’s answer to investors’ need for a vast array of “stories” that all may be derived from the same massive datasets. “The platform houses nearly every one of our datasets and allows users to find the information that best suits them at the right time,” Grey said. “Then, they can extract and leverage that data in multiple ways depending on their needs. That flexibility is by design.” The platform does not just permit extraction of data, however; it also enables users to create sets of predictive data that can help them refine future investment strategies and make informed investing decisions. “I find predictive analytics to be particularly exciting since they’re so key to making informed business decisions,” Grey said enthusiastically. “Our platform combines descriptive analytics – which help users understand what’s already happened – with predictive data that can be used to map out different scenarios. Doing so can help an investor predict what might happen to an individual property, to mortgage and market trends in general, or even where the real estate and mortgage industries might go in the future.” The enormous datasets must be constantly updated and confirmed, evaluated and analyzed, and, additionally, scrupulously curated and maintained to ensure that anonymous data remains fully anonymized. The vast amounts of information available on trends and changes in the market and economy that come as a result of collecting data from both public sources, like the public record, and private, anonymized sources, like mortgage performance records, is invaluable. However, Grey emphasized, there is a “trade-off” that investors must make in order to gain these powerful insights. “You simply cannot sacrifice privacy to achieve transparency in the market,” she said. “When you work with the volume of data Black Knight accesses and aggregates daily, you have an obligation to ensure you are a strong and resolute guardian of that information.” Often, data providers attempt to anonymize data by simply putting it all in one place and removing

New Technology Accelerates Fix-And-Flip Buying and Lending

by admin
Comment Off
690 views

Forward-Looking Investors and Lenders Will Be Beneficiaries By Danny Byrnes Ultra-tight inventory, strong demand and generationally low interest rates are the tailwinds driving today’s record home price appreciation. While these factors have created new opportunities for fix-and-flip investors and their lenders, they have also created new challenges. Properties that used to be on the market for weeks, now go in days, and in some cases, even without listing. For investors and their lender partners, this means making even faster decisions and doing everything within their control to streamline every aspect of the bridge mortgage process. Technology, of course, is already playing an increasingly broader role in both buying and financing real estate. For example, investors are searching online for properties, using databases and AI to identify possible sellers and using lender portals to apply for loans and deliver documents. Lenders, meanwhile, are relying on sophisticated automated valuation models (AVMs) to make loan decisions in days and to price their risk. Now technology is being successfully applied to new points in the buy-finance-and-service continuum, taking guesswork and speed bumps out of the process. Let’s look at two new examples of technology enhancements. Online Auctions Online auctions of foreclosed properties have long been a major source of inventory for fix-and-flip investors. Being able to go online and get the basic details and sales history of individual properties saves prospective investors time in the initial search process. However, once they get this information, they still must make several critical assumptions about the ROI on repair costs, the future appreciation of the property in its repaired state and the overall direction of the surrounding neighborhood. Recently, one online auction company, RealtyBid®, added a new level of insight for fix-and-flip investors. Partnering with Allan Weiss, one of the original developers of the Case-Shiller-Weiss housing price index (HPI), and Weiss Analytics, the company has developed new analytic tools to help investors examine the price trajectory of an individual property, as well as neighborhood and market dynamics. Users can now see property- and ZIP Code-level data dating back 10 years on 80 million properties, as well as one-year-out value forecasts for the property and Metropolitan Statistical Area (MSA). The site also gives investors access to property-level fix-and-flip comparables and repaired values, as well as the ability to run ZIP Code and property-level analyses. Fix-and-flip comps provide sale details, including first and second sales and hold time. This wealth of new information accelerates buying decisions and helps level the playing field between individual and institutional investors. Lien Releases The second innovation example involves a critical element in the closing process: lien releases. Before a lender will make a bridge loan on a property, it needs to know that any previous loans on that property have been paid off. Similarly, when a fix-and-flip project has been completed, one of the final steps in the mortgage process is obtaining a lien release, which shows that the investor has paid off the bridge loan. A delay in issuing a lien release can, in turn, delay the sale process. It can also delay refinancing the property with a longer-term mortgage in the case of a single-family rental. In either case, the results can potentially damage a lender’s relationship with investors and create reputational risk. Fix-and-flip lenders know that taking time and hassle out of all the aspects of the financing process is one of the major ways that they can build relationships and create repeat clients. Nationwide Title Clearing (NTC), a leader in providing post-closing document services, especially lien releases, is the company providing the innovation designed to save time and eliminate these hassles for lenders. Recently, NTC® introduced PerfectDocs®, a new self-serve platform that gives lenders and servicers greater control of the entire lien release process. In just minutes, and with a minimal number of keystrokes, a lender can now create and electronically e-sign compliant lien releases and then e-record in more than 2,000 counties. From a user’s perspective, the solution combines several complex processes into a single streamlined workflow platform, creating documents compliant with county requirements, agency and GSE guidelines and MERS requirements. It also automatically calculates accurate recording fees for every jurisdiction nationwide. In the current market environment, leveraging technology to accelerate both decision-making and process efficiency has taken on a new sense of urgency and is driving innovation. Forward-looking investors and lenders will be early adopters and beneficiaries of these enhancements.

Fix-And-Flip Projects S-Curve Spend

by admin
Comment Off
884 views

Financial Discipline Is the Only Way to Keep Projects Clean and Honest By Jake Harris As cashflow analysts, we charted a random sampling of fix and flip projects and graphed their cashflow comparing Total Spend (Y-axis) vs. Time (X-axis). A clear trend emerged with insights you will want to see before you start another fix and flip project; fix and flip project spend follows a clear S-Curve. We observed that these projects typically require less initial capital followed by a rapidly increasing capital demand, plateauing near completion. Note: The length of the initial startup period, and the length of the completion plateau are directly dependent to the speed at which the project starts, and how long the owner takes to successfully close out the project. Analysis of this trend found the source tied back to the typical order of construction with the first 3 Phases of Work (Demolition, Framing/Structure, and MEP Rough-Ins) being the initial scopes for most fix and flip projects. These initial 3 Phases can range in size and value given the overall scope of the project, with Phase 2 (Framing/Structure) and Phase 3 (MEP Rough-Ins) consistently taking longer than initially projected. NOTE: Phase 3 (MEP Rough-Ins) is the first Phase where outside inspections from local municipalities can be required, and while failing an inspection is typical, it adds delays as call-backs and coordination are needed and will add days to the schedule. The Fix and Flip Phases Phase 1 // Demo Phase 2 // Framing/Structure Phase 3 // MEP Rough-Ins Phase 4 // Façade Phase 5 // Interior Finishes Phase 6 // Finals Phase 7 // Exterior Over the Hump After Phase 3 (MEP Rough-Ins) is complete and has passed the required municipal inspections (mechanical, electrical, plumbing, and framing), the rehab begins to pick up speed and rapidly enters Phase 4 (Façade) & Phase 5 (Interior Finishes). Phase 5 is by far the most expensive and fastest moving phase of a fix and flip project with weekly spend more than doubling when compared to previous phases. Supply and installation of scopes such as wood floors, tile, cabinets, countertops, and final paint, etc., consume project funds at a rapid pace as those scopes are typically installed in a day or two with payment due upon completion. Data Insights The typical fix and flip owner does not have access to or take advantage of the same payment terms available to new construction or commercial projects where payments for goods and/or services can be deferred for 30, 45, or even 60 days. Payments for goods and/or services on fix and flip project scopes are typically due upon completion and most tradesmen and suppliers require a hefty deposit (up to 50%) prior to any work being done. This “Pay-Now” industry puts increased pressure on project cashflow and demands a higher level of planning and monitoring to avoid issues and to ensure success. Fix and flip projects also differ from new construction and commercial construction projects based on their S-Curve spend. New construction/commercial projects are much more level and balanced with nearly the same amount of spend week-over-week (after the initial startup). Thus, it is also easier to determine an approximate schedule when forecasting these projects as there is a typical weekly amount that can successfully be managed and approved, and the total project cost divided by that amount, can provide a rough estimate to the number of weeks it will take to successfully complete the project. RISK #1: Project Cashflow Funding needs to keep pace with the material & labor demands of Phase 5 (Interior Finishes) to maintain a healthy project pace. It is common for owners/lenders to develop a “payment rhythm” in both timing and amount, established in the mind of the owner/lender based on the timing of previous phases and capital needs. A sudden and sharp hike in cashflow will often catch people off-guard in their capital planning if they are unaware of the increased demand in Phase 5. Knowing that this increase is coming will allow for greater preparation and a smoother execution. Risk #2: Fraud/Commingling Overcapitalizing a project during the initial phases (1-3) or undercapitalizing that same project in the latter phases (4-6) will likely give rise to funding issues. When a project is undercapitalized during the 2nd half of the project (Phases 4-6) it places a strain on the person/persons responsible for construction management – either an external GC, or an internal Construction Manager. The cause for this strain is due to work being completed and payment demands now exceeding the project’s available funds. The project is under stress and as time continues, the owners are demanding more progress as the project is nearing completion, and owners may even withhold funds until more work is completed. This creates a problem for the Construction Manager as they have contracted and released work to loyal Subs and material providers that do great work, and now they do not have the means necessary to pay them upon completion – as previously agreed. They risk losing good labor and suppliers that have done exactly what they were asked to do, and in today’s climate they are extremely hard to replace. That is when most Construction Managers/GC’s start to “Rob Peter’s project to pay for Paul’s.” They will take from projects that have just started (Phases 1-3) when costs are low and deposits are high and use that deposit to cover cashflow shortages on later stage projects (phases 4-6) without the knowledge of either owner. Opportunity and convenience are to blame for this situation, and both the owners and General Contractors have been found guilty of commingling project funds to satisfy short term cashflow needs to their long-term detriment. Once this cycle starts, it is hard to break! The Solution Financial discipline is the only way to keep projects clean and honest. Owners must be able to “silo” and successfully separate each project’s cashflow to keep them safe and fully accountable. They also need to plan for the increased cashflow

The Next Generation of Artificial Intelligence is Here

by admin
Comment Off
2,117 views

Investors Leveraging the Power of AI Will Be the First to Gain an Advantage By Steve Gaenzler Artificial Intelligence (AI) has been a buzz word in many industries for years. Yet, innovation has been slow when it comes to the real estate transaction. Many processes are still manual, inefficient, and uninformed by useful data and insights. But, as we have seen over the last eighteen months, the COVID-19 pandemic has accelerated the adoption of technology and digital processes. AI has now become a hot topic in the real estate world. One particular discipline of AI is poised to disrupt the real estate industry and deliver powerful insights to investors who are ready to leverage it to their benefit. Computer Vision: The Next Generation of AI Computer vision is one of the most promising and exciting branches of the AI and machine learning universe. While you may not have heard of computer vision unless you are a data scientist, you may be familiar with some of its real-world applications, including facial recognition for accessing your phone, autonomous vehicles being able to read the road, and home security solutions that distinguish known faces from those of strangers. It works by analyzing patterns and pixels within an image to identify objects and processing that data into useful information. A successful computer vision model is able to “see” and understand the content of digital images. While this may seem like a simple task, teaching a computer to perceive images is incredibly complex. When we look at an image, we are unconsciously making lots of judgements. Looking through the lens of real estate – when we look at photos of a property – we are automatically judging the quality of the lighting, the condition of the kitchen, or how it compares to the standard of the neighborhood. Until now, that kind of analysis could only be done by a person. With computer vision models trained to analyze real estate, this can now be automated. Computer vision technology has many applications that can benefit the stakeholders in a real estate transaction. It can significantly customize and personalize the home search process for homebuyers. Real estate agents can perform a thorough valuation analysis or comparative market analysis far faster and cheaper than ever before. For investors, it has the power to help you fine-tune your investment strategies, increase return on investment (ROI) for portfolios, and make investment decisions based on hard data. Below are a few exciting ways computer vision and AI technology are making this possible: Intelligent search filters Search functionality allows users to easily filter results based on basic criteria like square footage or number of bedrooms and bathrooms. But there are other variables that investors may be interested in when searching for an investment opportunity. Maybe you are looking for fixer-uppers to fix and flip. That’s where AI comes in. Computer vision can help identify variables that are not captured by a listing data feed and help investors create a more granular “buy box” search. For instance, investors looking for fixer-uppers can use computer vision-derived condition ratings to create more targeted search results that will yield homes that meet their exact criteria. Fast, accurate property valuation When an investor is looking at a large number of properties, they need a better valuation product. Valuation tools with embedded computer vision can make it easier to value a larger volume of properties quickly and with more confidence. Computer vision can look at the interior and exterior condition of a home, objects and finishes that impact value, and other measurements to deliver a more accurate assessment in moments, eliminating the need for costly on-site reviews or appraisals that can take days to complete. Market predictions AI and predictive analytics help predict how markets may perform in the future based on past performance. This technology can also be deployed at a neighborhood and property level to predict when maintenance will be needed or help determine the quality of a potential investment’s future performance. Of course, determining which markets will perform and continue to be strong is complex, but the data provided by computer vision and machine learning technology makes the process significantly more reliable and consistent. Portfolio insights and marketing Computer vision can deliver consistent, reliable evaluations of an investor’s real estate portfolio and allow them to better manage their assets. Computer vision technology provides investors a more detailed look at the surrounding market and property details. Topography and satellite imagery combined with computer vision AI illuminate details about a neighborhood or local market in an automated way. Evaluating images through time helps investors track changes in markets to help them determine when to deploy an expansion, entry or even an exit strategy. Augmented reality Firms like Wayfair, Home Depot and others are creating tools that allow consumers to visualize what a room, or a home, would look like with different paint colors or even after a renovation. Comprehensive technology allows investors to see the potential in the property before buying. Especially in today’s environment with supply chain disruptions and construction labor shortages, this can be extremely helpful to understand the amount of work needed before committing to a project. Put simply, developments like these are transforming the real estate industry and making it easier for investors to make intelligent decisions based on data and insights. In an industry that often embraces technology at a slower pace, it will take some time and effort to integrate advanced tools and utilize AI to its fullest potential. Those leveraging the power of AI, and its financial returns, will be the first to gain an advantage in the market.

2022 Homebuying Trends

by admin
Comment Off
685 views

Which Changes Are Here to Stay? By Matthew Woodhouse Now that the frenetic pace and unprecedented challenges spurred by the COVID-19 pandemic have calmed a bit, the residential real estate market is settling into a steadier balance as we look toward the new year. The record low mortgage rates that lured so many homebuyers into the market in 2020 and 2021 are forecast to creep upward yet remain favorable, the competition for homes will cool as inventory levels continue to rise and home prices will increase at a more reasonable clip. What will be interesting to see in 2022 is how homebuyers will behave in the wake of this historic moment in time. In addition to serving as a catalyst for record high origination volume, the pandemic accelerated the adoption of mortgage technology, opened consumers’ minds to evolutionary ideas — buying a home sight unseen, for example — and spurred migration to the suburbs. As a result, the following five trends are likely to emerge or continue throughout the coming year. Trend 1: Consumers will increasingly seek out lenders who can deliver digital experiences. Mortgage technology had already been gaining momentum when the pandemic struck. Then the isolation resulting from contagion concerns as well as mandated shutdowns sent that momentum soaring. Consumers embraced a self-serve approach to everything from electronically scheduling their appraisals, inspections and closing appointments to e-signing their closing documents. In fact, according to ServiceLink’s State of Homebuying Report, 89% of millennial and Gen Z homebuyers reported using technology during the homebuying process. Across age groups, 68% said they had used technology. These homebuyers overwhelmingly agreed that their perception of the homebuying process had been improved by technology. They cited the convenience and ease of use plus time savings as the primary benefits of using mortgage technology. This increasing confidence in, and growing reliance on, technology has fueled consumers’ desire for a seamless, transparent, fully digital homebuying experience. In growing numbers, they will choose lenders that can deliver tech-enabled experiences in 2022. Fortunately, lenders have access to a broad range of digital mortgage solutions that can not only improve the customer experience but also increase internal efficiencies (think hybrid appraisals and AI-powered title decisioning). Every step lenders take to accelerate the journey to the closing table will work to their advantage in 2022. Trend 2: Investors will rely more strongly on technology. As inventory recovers and consumers continue to seek more space in the new hybrid work environment, the 2022 market holds great promise for savvy investors. Whether their strategy is to buy and hold or fix and flip, speed will be critical, as competition for properties is likely to persist throughout the year. Investors will increasingly look to technology to give them the edge. For example, through digital auction sites, SFR and fix-and-flip investors can now search properties in foreclosure, make offers and close digitally, without having to go to the courthouse. Digital title services, hybrid valuation products (AVM, BPOs and appraisals) and portfolio management tools powered by AI and machine learning will also help fuel investor success, by helping them improve their efficiencies and take advantage of cost-saving opportunities. Trend 3: The confidence to buy a home sight unseen will continue to grow. In November 2019, 32% of respondents to a Redfin survey who had purchased homes in the past year said they had made at least one offer on a home they hadn’t seen in person. In December 2020 that percentage nearly doubled, to 63% of respondents. Travel concerns and social distancing requirements, intense competition for properties and the growing availability of online video tours provided the impetus for homebuyers to bid sight unseen. Think about it: You want to buy a home, let’s say in another state, but hopping on a plane isn’t your first choice in the middle of a pandemic. And even if you did make the flight, by the time you got there, another buyer may have already closed the deal. That’s why, in the COVID-19 environment, virtual walkthroughs were a dream come true for buyers and sellers. They enabled prospective buyers to get a good look at a particular home and place a timely bid. As with other technological solutions, now that consumers have been introduced to virtual tours and recognize their value, they’re coming around to giving them a try. In fact, nearly one in five respondents to the ServiceLink homebuying survey confirmed that, moving forward, they would consider buying a home without seeing it in person. Trend 4: Previously hesitant homebuyers will enter the market. While no one’s looking for a pendulum swing from seller’s market to buyer’s market in 2022, we can certainly expect movement toward the middle. And as the environment grows increasingly buyer-friendly — with more inventory, fewer bidding wars, stabilizing prices and relatively low interest rates — homebuyers who have been patiently waiting in the wings can make their move. Among respondents to the ServiceLink survey, one-third said they had considered but ultimately decided against purchasing a home in the time period of April 2020-April 2021. Why? Thirty-four percent decided to upgrade instead, 31% felt the available homes were too expensive and 24% faced a change in their financial situation. It’s not at all surprising that nearly a third of respondents found homes to be too expensive, given prices rose so dramatically in 2020 and 2021. According to Freddie Mac, house price growth was 11.3% in 2020, and is expected to be 16.9% for 2021. Fortunately for buyers, Freddie forecasts price growth will slow to 7% in 2022. This adjustment, coupled with relatively low mortgage rates — Freddie looks for an average 30-year fixed rate of 3.5% in 2022, compared with 3.0% in 2021 and 3.1% in 2020 — and more choice in listings, should bring more homebuyers to the table. Trend 5: Families will continue moving to the suburbs. The remote work model made commonplace by the pandemic has caused people to think differently about their surroundings. If they’re going to work

The Housing Market

by admin
Comment Off
705 views

A Look Back at 2021, A Look Ahead at 2022 By Rick Sharga As the year comes to an end, it’s time to take a look back at the real estate market in 2021 and begin thinking about what might be in store for 2022. The Housing Market Continues to Thrive Despite historically low levels of inventory, the housing market had an exceptionally strong year. Existing home sales will likely exceed six million, and new home sales will finish the year around 800,000 – both higher numbers than 2020 sales, and both actually suppressed by the stubbornly low number of homes for sale. Inventory of existing homes for sale across the country averaged between 2.5 and 3.0 months of supply, less in some high demand markets like California, where inventory was often 1.5 months or less. In a normal, healthy market, inventory levels are typically six months, so the shortage of homes for sale was very real and had a huge impact on the market. New home inventory was slightly better, at one point almost reaching the six-month mark, but as builders faced shortages due to COVID-19-induced supply chain disruption, construction slowed noticeably, and inventory levels plummeted. Builders also slowed down the sales of under-construction homes due to uncertainty about the availability of supplies like windows and roofing materials, and extreme volatility of material prices. Housing starts and permits have been strong for the second half of the year, and assuming that supply chain issues and labor shortages can be addressed, more inventory should be coming to market in 2022 and subsequent years. Strong Demand Drives Price Appreciation Demand for homes remained extraordinarily strong. According to the Mortgage Bankers Association (MBA), purchase loan originations will set a record in 2021 at $1.6 trillion and grow from there in 2022. What’s driving the demand? Demographics is the biggest driver and will continue to be for the next few years. The largest cohort of Millennials – the largest generation in the history of the USA – is rapidly approaching the prime age for first-time homeownership. So new home buyers will be entering the market in large numbers for at least the next 2-3 years. Historically low interest rates have also been a demand driver. With rates hovering at or just below 3% for a 30-year fixed-rate mortgage, it’s often less expensive to make a monthly loan payment than it is to pay rent in many markets across the country. And the COVID-19 pandemic has also contributed to unusually strong demand, partly by accelerating a trend that was already happening (urban renters becoming suburban homeowners) and partly because of the desire to find “healthier” environments and the ability to work from home. The supply/demand imbalance has driven prices to record levels – almost $353,000 for existing homes and almost $409,000 for new homes at the beginning of the fourth quarter of 2021. Home price appreciation has routinely been between 15-20% on a year-over-year basis for the second half of the year, causing fears that the market may be entering into “bubble” territory, but most economists believe that price appreciation will moderate in 2022, while still being slightly higher than the historical average of 3.5-4%. This price appreciation has resulted in the highest level of homeowner equity ever, some $23 trillion dollars. No Foreclosure Tsunami Yet, and One Not Likely Next Year The doom-and-gloom predictions of a massive wave of pandemic-driven foreclosures turned out to be completely off the mark in 2021. A recent report from RealtyTrac’s parent company ATTOM Data Solutions noted that foreclosure activity in the third quarter of 2021 was up 34% from the previous quarter and 68% from the third quarter of 2020. But the report also noted that foreclosure activity was down by 60% from the same quarter in 2019, when foreclosure activity was at more normal levels. And it is unlikely that the number of properties in foreclosure will return to normal levels until late in 2022 at the earliest. While the number of delinquent loans soared early in the pandemic, those numbers have declined over 41% since September 2020, and the number of seriously delinquent loans – borrowers who are at least 90 days past due on their payments – dropped by over 1 million during that same time period. At the end of October 2021, overall delinquency rates dipped below 4% for the first time since prior to the pandemic. The MBA believes that delinquency rates will continue to decline as the economy recovers and unemployment rates fall. According to the MBA’s Chief Economist Michael Fratantoni, “The delinquency rate tends to be highly correlated with the unemployment rate over time. This was certainly true over the past year, as unemployment spiked during the onset of the pandemic, then has fallen rapidly as the economy has re-opened and rebounded. Our forecast is for the unemployment rate to continue to decline, reaching 4.5% by the end of 2021, and likely dropping below 4% by the end of 2022. The delinquency rate should follow that downward path closely.” Mortgage delinquency numbers have also been inflated by the forbearance program, with over 1.2 million borrowers still in the program entering the fourth quarter of 2021. While none of the borrowers in the program are being reported as delinquent to the credit bureaus, no payments have been received on their loans, so the loans themselves show up in the industry’s delinquency reports. Many industry analysts predicted that the majority of borrowers entering the forbearance program would eventually default on their loans, creating a new wave of foreclosures. So far, that hasn’t been the case at all. Two important points to take away here: First, less than 1% of the borrowers who entered and exited the forbearance program did so with a deed-in-lieu, short sale or default. Second, during the time when the 6.8 million borrowers in forbearance cycled in and out of the program, delinquency rates consistently declined, strong evidence that the borrowers who have exited the program have been