Mortgage Forbearances Are Down But Delinquency Rate Is Up

From the first week of March to the first week of April, the number of mortgages in forbearance went up 1,396% thanks to the economic devastation caused by the pandemic. By mid-May, 4.7 million homeowners were pausing their payments, though the number of new forbearance plans had begun to slow down—to a measly 26,000 new agreements a day!

In an effort to get people back to work, most states, including California, are in the late stages of opening despite rising coronavirus cases. But has it helped those who’ve been struggling to pay their mortgage bill for the last four months?

Mortgage Forbearances Are Down

Mortgage forbearances have gone down slightly. Analysts at Black Knight have reported that the number of forbearances has been trending downward since the beginning of June. As of the 16th, it was at 4.6 million homeowners.

Of that 4.6 million, about 2 million of those loans were backed by Fannie Mae and Freddie Mac. Federal Housing Administration (FHA)  and Veterans Administration (VA) backed loans make up 1.5 million of the forbearances. The remaining 1.2 million mortgages are not backed by the government, so they’re not covered by the CARES-Act.

Mortgage Delinquencies Are Up

Black Knight also reported this week that mortgage delinquencies are up. In fact, they’ve surged to the highest level in nine years. In May, 4.3 million mortgages were at least 30 days overdue or in active foreclosure.

Black Knight qualified “delinquent mortgages” as ones where the bill has not been paid whether the homeowner had a forbearance or not. So how could forbearances be down while delinquencies are up?

For one, the CARES Act COVID-19 stimulus bill made it extremely easy for homeowners to put their federally-backed mortgage loan into forbearance. All it took was a call to your loan servicer to say that you were experiencing financial hardship, but no additional proof was needed to get approved.

Many people elected to get a preemptive forbearance, just in case but kept paying their bill anyway. In April, about half of homeowners in forbearance continued to make their payments, but by mid-June, only 15% of people were making their payments.

As for the homeowners that are delinquent without forbearance or in active foreclosure, they likely have private loans. These people are not guaranteed a forbearance plan if they ask for one and they aren’t protected from foreclosure during the pandemic.

Some Good News

Despite the fact that millions of homeowners are having trouble paying their mortgage bill, as of June 10th, mortgage applications have gone up 13% from last year according to the Mortgage Bankers Association. If you haven’t been financially affected by COVID-19, now is a great time to get a new mortgage, since rates are at historic lows.

If you want to take advantage of these rates and buy a home or rental property, email us or gives us a call at (323) 412-9060.

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