Newsletter - June 2020
Newsletter — June 2020
The mortgage delinquency rate saw the largest monthly increase ever reported in April as U.S. unemployment spiked to 14.7%, more than tripling from March.
Thanks a ton, COVID-19.
A report from Black Knight showed about 3.6 million homeowners were past due on their mortgage payments, including those in forbearance that didn’t make an April payment — that’s 6.45%, up from 3.39% the previous month.
In March, Congress passed the Coronavirus Aid, Relief and Economic Security (CARES) Act, under which homeowners whose mortgages are backed by Fannie Mae or Freddie Mac could request reduced or suspended mortgage payments without incurring a penalty for up to 12 months.
As of mid May, 4.7 million mortgages (8.8%) were in forbearance, according to Black Knight. But how many of these homeowners actually needed the relief?
A LendingTree survey revealed that only 5% of homeowners who sought forbearance said they would not have been able to pay their mortgage otherwise, and 72% reported feeling some guilt about taking advantage of the program.
"With uncertainty around how long the COVID-19 crisis will last and how deep its economic impact will be, preserving cash is a priority for many Americans,” said Tendayi Kapfidze, VP, Chief Economist, LendingTree. “A mortgage forbearance temporarily removes mortgage payments from the equation. This pause can provide more wiggle room in homeowners’ budgets until the forbearance period ends."
The good news is that while the total number of mortgages in forbearance is higher, new requests had slowed to about 27,000 a day last month — down 85% from April.
"The pace of forbearance requests continued to slow in the second week of May, but the share of loans in forbearance increased," said Mike Fratantoni, Senior Vice President and Chief Economist of the Mortgage Bankers Association (MBA).
"We will continue to closely monitor the forbearance request and call volume data for any sign of an uptick, but current trends suggest that if the economy continues to gradually reopen, the situation could be stabilizing."
For everyone’s sake, we certainly hope so.
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