A weekly survey from the Mortgage Bankers Association released Monday shows that the proportion of mortgage borrowers seeking forbearance relief in the first week of December rose to the highest level since August. At the same time, call volume at the companies that collect payments rose to the highest level since mid-April.
"The latest economic data is showing a slowdown, particularly an increase in layoffs and long-term unemployment," Mike Fratantoni, MBA's senior vice president and chief economist, said in a statement. "Coupled with the latest surge in COVID-19 cases, it is not surprising to see more homeowners seeking relief."
The increased number of households seeking mortgage relief comes amid evidence of a faltering – and uneven – economic rebound. U.S. household wealth grew to a record-shattering $123.52 trillion in the third quarter, a sign that affluent Americans are doing well even as millions of workers remain unemployed.
Under the March CARES Act, homeowners with a federally backed home loan can skip or delay mortgage payments for up to a year. But lawmakers have cautioned that forbearance is not forgiveness: At some point, homeowners will owe the payments they chose to temporarily suspend.
At the end of the forbearance plan, homeowners will be provided with several options to compensate for the missed payments – but will not be required to pay everything back all at once in what’s known as a “balloon payment,” according to mortgage giant Fannie Mae. Frequently, mortgage lenders will tack on the balance that homeowners did not pay during the forbearance period onto the end of the loan.
Still, the total percentage of loans that are in forbearance actually fell to 5.48% in the week ending Dec. 6, down from 5.54% the week before. But more homeowners exiting forbearance are using a modification, "a sign that they have not been able to fully get back on their feet, even if they are working again," Fratantoni said.
MBA's survey is based on data from 37.1 million loans, roughly 74% of the first-mortgage servicing market.