Will mortgage lenders close their doors in the coming months? If these numbers hold up and they do not receive a bailout, it is possible.
According to a new study by the Mortgage Bankers Association (MBA), the percentage of U.S. homeowners who have stopped making mortgage payments under the federal government’s new forbearance program is surging.
Researchers found that the percentage of loans in forbearance soared from 0.25 percent on March 2 to 2.66 percent as of April 1. And, for loans supported by Ginnie Mae (a mortgage lender for low- and middle-income borrowers), the forbearance rate is 4.25 percent.
“MBA’s survey highlights the immediate relief consumers are seeking as they navigate the economic hardships brought forth by the mitigation efforts to stop the spread of COVID-19,” said Mike Fratantoni, MBA’s Senior Vice President and Chief Economist, in a statement. “The mortgage industry is committed to providing this much-needed forbearance as mandated by law under the CARES Act. It is expected that requests will continue to skyrocket at an unsustainable pace in the coming weeks, putting insurmountable cash flow constraints on many servicers – especially IMBs.”
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The increase came as the U.S. economy largely shut down to help stem the spread of the coronavirus. The government is requiring lenders handling payments on federally backed loans to give borrowers grace periods of as much as six months at a time with no penalties. Loan servicers say they’ve been flooded with borrowers requesting help.
Servicers are reporting that wait times for their customer service representatives jumped to almost 18 minutes from less than two minutes three weeks earlier, according to the MBA. It could get worse: As Americans lose jobs by the millions, mortgage companies say they’ll soon get overwhelmed.
The loan servicers, which are required to pay bondholders whether or not borrowers pay, are facing a liquidity shortfall that could be devastating for some independent mortgage companies. The MBA said that 3.45% of loans held by nonbanks have gone into forbearance.
It is projected that one-third of homeowners could hit the pause button on mortgage payments in the next month.
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