By Sabrina Karl
With the coronavirus pandemic disrupting many Americans’ financial stability, and Congress passing the CARES Act, the door has been opened for U.S. homeowners to make special requests for mortgage forbearance. And the numbers have skyrocketed.
Forbearance refers to an agreement between a homeowner and their mortgage lender that monthly payments can be reduced or paused entirely for some agreed upon period. A plan for later repayment is established, and the lender cannot foreclose during forbearance.
We’ve now seen the release of the first monthly forbearance data since the pandemic took hold in the U.S., and March’s figures have come in at record levels.
According to the Mortgage Bankers Association, which regularly reports on the percentage of mortgages in forbearance, the share of homeowners who have been granted more time to pay their mortgage jumped from 0.25 percent in February to almost 2.7 percent in March.
That’s roughly a 1,000 percent increase, but the requests are likely just getting started. For one, the survey was conducted on April 2 for activity during March, and the CARES Act was passed very late in the month, on March 27.
Second, it’s expected that households experiencing negative financial circumstances from the pandemic will find their expenses increasingly difficult to cover with each continued week of stay-at-home measures. For example, a homeowner who is able to make her first mortgage payment after losing her job may not be able to muster the next payment.
Forbearance numbers were highest among Ginnie Mae-backed loans, such as FHA, VA, and RD mortgages, which tend to serve low- to moderate-income borrowers. Here the forbearance rate for March was 3.45 percent vs. just 0.19 percent in February.
It is strongly recommended that anyone who feels they may need to request forbearance should contact their mortgage lender as soon as possible.