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Preparing for Another Economic Downturn

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The economy is set to bounce back, according to Bloomberg, however, as key pillars of economic support are set to go away we could have another downturn toward the end of the summer.

The big test for the economy will come at the end of June, according to Bloomberg. Much of the support for the recent recovery has come from programs put in place by the Federal Reserve, Congress, state governments and banks to provide relief for consumers, homeowners, and businesses. Some, however, are scheduled to phase out soon.

This includes some regulations aimed at protecting homeowners, including forbearance requests. States such as California worked out deals with banks in late March to provide 90-day grace periods to homeowners when it comes to paying their mortgages. If not extended, those too will expire at the end of June. Those grace periods are providing support not just to households struggling to pay bills, but also to the housing market by keeping borrowers who can't pay their mortgage from having to sell their homes or face foreclosure. If mortgages come due in July and borrowers can't pay, that could lead to the kind of plunge in the housing market that so far has been averted, Bloomberg notes.

Forbearance requests have begun to slow, according to data from Black Knight, but there is a risk of May-related forbearance activity changing that trajectory.

As Black Knight Data & Analytics President Ben Graboske explained, the rate at which American homeowners have been seeking mortgage forbearances began to slow from the middle of April forward, and Black Knight will monitor this trend to see if it continues.

“After surging at the beginning of April and then rising again near the April 15when most mortgages become past due and late fees are chargedthe number of new forbearance requests has declined in recent weeks,” said Graboske. “While total forbearance volumes continue to mount, daily inflow has begun to taper off. Between 53,000 and 102,000 new plans have been put into place over each of the last nine days, and even the largest single-day volume was less than a quarter of what we saw at the start of Apriland may see again next week. What remains an open question at this point is to what degree forbearance requests will look like at the beginning of Maywhen the next round of mortgage payments become due, and with nearly 30 million Americans newly unemployed in the last month."

About Author: Seth Welborn

Seth Welborn is a Reporter for DS News and MReport. A graduate of Harding University, he has covered numerous topics across the real estate and default servicing industries. Additionally, he has written B2B marketing copy for Dallas-based companies such as AT&T. An East Texas Native, he also works part-time as a photographer.
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