With multiple vaccines on the way, many expect the pandemic's impact on the world to ease in the coming months. As the economy recovers, lenders will increase loan availability in correlation with the reduction in risk, TransUnion reports in its consumer credit forecast for 2021. Some troubled borrowers facing additional burdens after the end of the CARES Act-related mortgage protection are turning possibly products such as liquidity refinancing disbursements too.
In the spring, the two six-month grace periods granted by the law will end for many homeowners. According to the Mortgage Bankers Association, around 2.8 million borrowers have been lenient since the last full week of November.
As things stand – regardless of future security enhancements and other programs – those who are lenient will either make payments again or they will be in default.
"There will be a period of reflection around April, May and June. This is the cliff we must all look for to see our consumers deviate from their leniency programs," said Joe Mellman, senior vice president, mortgage business Leader at TransUnion said in an interview. "The GSEs and the FHA are going to have programs to help them do this. Then we will likely see a sharp drop and then a steady drop from there through the end of the year."
Mortgage holders tend to have more non-mortgage loans than tenants, so liquidity is a big issue for borrowers resuming their mortgage payments in 2021, Mellman said. Because of this, payout refinances could see an increase in activity.
"We saw disbursement refinancing stocks at astronomical highs in 2019. Much of it declined because it is inherently a riskier product and lenders shy away from it in COVID times," Mellman said. "We believe that once we get COVID under control at the national level and the economic recovery begins in the second half of next year, we will see refi programs payback to consumers who take advantage of them." You."
2021 is likely to continue to be a strong year for the emergence, with volume expected to drop closer to 2019 levels than 2020, according to TransUnion. With interest rates expected to remain low, the company is forecasting more than 2 million mortgage origins in each of the first two quarters of 2021. This equates to a year-on-year change of 13.9% and -32.3% from the 2020 opening frame. While the origin is cut by a third, this is a sharp drop, but it would only be a result of a boom period historical highs.