33% kept house payments current after winning coronavirus reprieve: Bank CEO
'I'll continue to pay until I can't'
About a third of homeowners granted forbearance on mortgages handled by Citizens Bank as the COVID-19 pandemic shut down large swaths of the U.S economy have kept their payments current anyway.
Altogether, approximately 7 percent of the customers on the lender's $18.7 billion book of residential mortgages as well as those paying the $5.3 billion in loans serviced by Citizens were granted such a reprieve, CEO Bruce Van Saun told FOX Business.
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“If you give folks a free option that, no questions asked, we’ll put you in forbearance, I think many borrowers said, ‘I'll just take them up on that and if I don't need it, I don't need it, but I'll continue to pay until I can't,’” Van Saun told FOX Business.
Nationally, 8.53 percent of all mortgages went into forbearance as the economy sank into the worst downturn since the Great Depression, according to a report released Monday by the Mortgage Bankers Association.
| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| CFG | CITIZENS FINANCIAL GROUP INC. (RHODE ISLAND) | 47.08 | -1.06 | -2.20% |
Forbearance was approved by regulators earlier this year as stay-at-home orders designed to slow the spread of COVID-19 forced non-essential businesses across America to close and, in many cases, lay off workers.
The U.S. economy ground to a halt in the final weeks of March, leading to an annualized 5 percent contraction in gross domestic product during the first quarter of the year.
Economists at the major Wall Street banks all predict the economy will shrink by at least 30 percent during the three months through June as more than 42 million workers have filed first-time jobless claims since the shutdowns began.
While the economic uncertainty prompted borrowers to put their mortgage payments on hold, the bank hasn’t seen a big spike in delinquencies.
They're able to keep their payments current partly because of the stimulus checks sent to Americans making less than $100,000 a year as well as the Paycheck Protection Program, which extends forgivable loans of up to $10 million to small businesses with the goal of helping them keep employees on the payroll while they're closed.
“The big question is what happens to those people when they come out of forbearance. Are they able to resume their payments, or do their payments need to be restructured in some way?” Van Saun said.
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He added that Citizens is seeing some positive signs from U.S. consumers, suggesting the economy is getting back on track.
As of last week, the decline in spending on Citizens credit cards had narrowed to 10 percent from 35 percent at the peak of the lockdowns.
“People are out spending money, Van Saun said. “They're spending in different areas, maybe, than they did before, but the good news is we're seeing people start to resume real economic activity.”