Number of Americans skipping mortgage payments fell for first time since March
There are roughly 4.2M Americans in forbearance plans, down from 4.3M the prior week
Fewer homeowners are temporarily skipping their mortgage payments, suggesting the nation's real estate market is gradually recovering from the coronavirus pandemic and related lockdown.
A weekly survey from the Mortgage Bankers Association released Monday found that 8.48 percent of total loans are now in forbearance plans, down from 8.55 percent as of June 14. It was the first time the number of Americans skipping their mortgage payments dropped since March 10, when the outbreak of the virus first paralyzed the nation’s economy.
There are roughly 4.2 million Americans in forbearance plans, down from 4.3 million the prior week, the survey shows.
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“Fewer homeowners in forbearance underscores the continued improvements in the job market, and provides another sign of the fundamental health of the housing market, which has rebounded considerably over the past several weeks,” Mike Fratantoni, chief economist at the Mortgage Bankers Association, said in a statement.
The percentage of Fannie Mae and Freddie Mac loans in forbearance fell for the second week in a row to 6.31 percent.
Meanwhile, the percentage of loans backed by Ginnie Mae, including Federal Housing Administration and Veterans Affairs loans, in forbearance held steady for the third week at 11.83 percent.
The pandemic 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. Close to 46 million Americans joined the unemployment ranks in the last three months.
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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.
"The big unknown with respect to this positive development is the extent to which it relies upon policy measures put in place to help families through this crisis, particularly the stimulus payments and enhanced unemployment insurance benefits that were key parts of the CARES Act," Fratantoni said. "We expect to see further improvements in the weeks ahead given the drop in forbearance requests this week."
Lawmakers have cautioned that forbearance is not forgiveness: At some point, homeowners will owe the payments they chose to temporarily suspend.
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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 38.2 million loans, roughly 76 percent of the first-mortgage servicing market.