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No Relief For Three Million-Plus Borrowers

Coronavirus mortgage bailouts have helped a large number of Americans, but many still cannot pay, or are not paying, what they owe.

Recently data collection outfits reported a larger than anticipated bounce in the number of borrowers in public and private coronavirus-related mortgage bailout programs, according to CNBC.com.

Over just the past week, the number of mortgages in active forbearance plans plummeted by 147,000 or 4%, according to data from Black Knight. As of Tuesday, 3.8 million borrowers were still holding off their monthly payments; that’s 7.1% of all active mortgages. Of those, three-quarters have had their terms extended from the initial three-month program.

At the end of August, the three-month terms of about a quarter of a million borrowers were expiring. While far fewer expired at the conclusion of June, it’s still the most substantial plummet since that first expiration date. There’s been a drop of active forbearances by about one million, or 21%, since hitting its apex in May.

Initially, borrowers have the leeway to delay monthly payments for three months by the government program for borrowers with loans backed by Fannie Mae and Freddie Mac, or by FHA/VA. That can then be extended to six months, after which a request can be made for as much as a year of forbearance. An important note: these payments can be made up either when the home’s sold or the loan’s refinanced, but aren’t forgiven. Meantime, mortgage modifications might apply to those who request long-term forbearances.

A total of 3.8 million—representing 7.1% of all active mortgages—have continued to put off their monthly payments as of September, suggesting a lack of progress in their financial pictures since they’re

still not positioned to satisfy their monthly payments. What’s more, new forbearance plans are being sought by fewer borrowers. Compared with the same four-week period in July, there was a 13% drop in forbearance starts through the first four weeks of August.

“September may provide the true test, though, as impacted borrowers were still receiving full expanded unemployment benefits up through July 31,” said Andy Walden, Black Knight economist and director of market research.

In April, the Chief Economist at Moody's Analytics estimated that as many as 30% of Americans with home loans—nearly 15 million households—could stop paying their loans if the economy is closed through the summer.

“This is an unprecedented event,” said Susan Wachter, professor of real estate and finance at the Wharton School of the University of Pennsylvania, in an article by the Los Angeles Times. “The great financial crisis happened over a number of years. This is happening in a matter of months—a matter of weeks.”

Andrew Jakabovics, a former senior advisor for the U.S. Department of Housing and Urban Development and who is now at Enterprise Community Partners, a nonprofit affordable housing group, said of the virus, “nobody has any sense of how long this might last.”

“The forbearance program allows everybody to press pause on their current circumstances and take a deep breath. Then we can look at what the world might look like in six or 12 months from now and plan for that,” Jakabovics told the Los Angeles Times.

About Author: Chuck Green

Chuck Green has contributed to the Wall Street Journal, Washington Post, Los Angeles Times, San Francisco Chronicle, Chicago Tribune and others covering various industries, including real estate, business and banking, technology, and sports.
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