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More than 4.1 million homeowners are temporarily skipping their mortgage payments as the coronavirus pandemic batters Americans’ finances, but the number of people needing assistance is beginning to slow.
A weekly survey from the Mortgage Bankers Association released Monday found that 8.16 percent of total loans are now in forbearance plans, up from 7.91 percent as of May 3. It was the smallest increase in forbearance since March 10, when the outbreak of the virus first paralyzed the nation’s economy.
"The pace of forbearance requests continued to slow in the second week of May, but the share of loans in forbearance increased," Mike Fratantoni, MBA's senior vice president and chief economist, said in a statement. "There has been a pronounced flattening in loans put into forbearance - despite April's uniformly negative economic data, remarkably high unemployment, and it now being past May payment due dates.”
The potential exception to the trend, however, are mortgages backed by Ginnie Mae, including Federal Housing Administration and Veterans Affairs loans. More than 11 percent of Ginnie Mae-backed loans are currently in forbearance, according to the report.
The crisis has triggered the worst economic catastrophe in the U.S. since the Great Depression as stay-at-home measures were enacted across the country to limit the spread of COVID-19. Job losses have continued to mount, with more than 36 million Americans joining the unemployment ranks in the last two months.
Under the $2.2 trillion CARES Act passed by Congress at the end of March, affected 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.
“We want every homeowner who is struggling because of this pandemic to know they have mortgage options,” Fannie CEO Hugh Frater said at the end of April. “We do not require a homeowner to repay missed payments all at once at the end of the forbearance plan, unless they choose to do so.”
MBA's survey is based on data from 38.3 million loans, roughly 77 percent of the first-mortgage servicing market.