American homeowners gained a record $1 trillion in tappable equity in the second quarter of 2021, a single-quarter record according to mortgage data company Black Knight, Inc. That brings the total equity available to $9.15 trillion, up 37 percent in a single year.
“Such strong equity positions should help limit the volume of distressed inflow into the real estate market as well as provide strong incentive for homeowners to return to making mortgage payments – even if needing to be reduced through modification,” said Ben Graboske, Black Knight president of data and analytics.
According to their latest Mortgage Monitor report, this available equity comes even as loans against home equity surged. “The 1.1M cash-outs originated in Q2 were the largest quarterly volume in nearly 15 years, with more than $63B in equity withdrawn in the quarter – the most since mid-2007.”
This increase in equity is good news for homeowners who are in forbearance on their mortgages. “Of borrowers still in plans as of mid-August, some 98% have at least 10% equity in their home – a drastically different dynamic than during the worst of the Great Recession, when more than 40% of all mortgage,” Black Knight reports.
“All in, just 130K of the 1.75M active forbearance plans have less than 10% equity after factoring in 18 months of deferrals, with more than 90K (69%) of those being FHA and VA mortgages.”
The Biden administration has stepped up its efforts to prevent what it calls “avoidable foreclosures.”
The Consumer Financial Protection Bureau (CFPB) released a new mortgage servicing rule that took effect August 31 to help prevent foreclosures for borrowers facing delinquency. The rule will prevent most foreclosures from taking place before January 2022.