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Mortgages in forbearance drop for the first time since March

Amy Scott Jun 8, 2020
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Ian Waldie/Getty Images
COVID-19

Mortgages in forbearance drop for the first time since March

Amy Scott Jun 8, 2020
Heard on:
Ian Waldie/Getty Images
HTML EMBED:
COPY

For the first time since the COVID-19 crisis began, the number of homeowners seeking relief from their mortgage payments is falling. According to mortgage technology and data provider Black Knight, 4.7 million home loans were in forbearance — meaning borrowers have reduced or delayed their monthly payments — as of June 2, down about 34,000 from a week prior.

That’s still almost 9% of outstanding mortgages, but the decline suggests that as more people are heading back to work, they’re also getting back to paying those bills. 

Many who signed up for relief have continued to make payments, said Black Knight economist Andy Walden, though the percentage dropped from about 46% of borrowers in April to 22% in May.

“Now we’re at about 1 in 5 homeowners in forbearance that are continuing to make their mortgage payment — still a significant number, but not quite as high as it was back in April,” he said.

And 90% of homeowners in forbearance plans have at least 10% equity in their homes, he said, protecting them from the risk of foreclosure.

“If you have more than 10% equity in your home and you become stressed to a point where you’re not able to afford your home over the long run, you have the option to go out and sell your home through the traditional mortgage market, tap into whatever equity you had and kind of reset yourself financially,” Walden said.

Not everyone who needs relief may be getting it. Regulators are receiving complaints about borrowers being steered away from forbearance, said Mike Litt, the consumer campaign director for the U.S. Public Interest Research Group.

“The bottom line is this: If you have a federally backed mortgage, you can request a forbearance to pause payments for up to 12 months,” he said. “Your servicer is not allowed to make you jump through hoops.”

In recent a joint statement, the Consumer Financial Protection Bureau and the Conference of State Bank Supervisors spelled out the rules. Servicers can’t make borrowers prove financial hardship, charge fees or require a lump sum at the end of forbearance. 

“We thought it was necessary to really clarify this, for both the borrower — this is meant to protect individuals at a time of incredible hardship — and for the industry,” said John Ryan, CEO of the state group.

For many Americans, though, the hardship didn’t begin with the pandemic. According to Black Knight, 1.4 million homeowners were already behind on their mortgage payments in February.

COVID-19 Economy FAQs

Can businesses deny you entry if you don’t have a vaccine passport?

As more Americans get vaccinated against COVID-19 and the economy begins reopening, some businesses are requiring proof of vaccination to enter their premises. The concept of a vaccine passport has raised ethical questions about data privacy and potential discrimination against the unvaccinated. However, legal experts say businesses have the right to deny entrance to those who can’t show proof.

Give me a snapshot of the labor market in the U.S.

U.S. job openings in February increased more than expected, according to the Labor Department. Also, the economy added over 900,000 jobs in March. For all of the good jobs news recently, there are still nearly 10 million people who are out of work, and more than 4 million of them have been unemployed for six months or longer. “So we still have a very long way to go until we get a full recovery,” said Elise Gould with the Economic Policy Institute. She said the industries that have the furthest to go are the ones you’d expect: “leisure and hospitality, accommodations, food services, restaurants” and the public sector, especially in education.

What do I need to know about tax season this year?

Glad you asked! We have a whole separate FAQ section on that. Some quick hits: The deadline has been extended from April 15 to May 17 for individuals. Also, millions of people received unemployment benefits in 2020 — up to $10,200 of which will now be tax-free for those with an adjusted gross income of less than $150,000. And, for those who filed before the American Rescue Plan passed, simply put, you do not need to file an amended return at the moment. Find answers to the rest of your questions here.

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