COVID Crisis Pushes Nearly 4M US Mortgages Into Forbearance

Nearly 4 million U.S. home mortgages — or 7.3 percent of the total — have entered into “forbearance” programs with their lenders as the COVID-19 economic crisis has left owners unable to pay, figures out Friday (May 1) show.

“The forbearance numbers are climbing steadily, day by day,” said Anthony Jabbour, CEO of mortgage technology and data provider Black Knight Inc.

Black Knight’s McDash Flash Forbearance Tracker found that as of Thursday, 3,853,000 U.S. mortgages had fallen into forbearance, meaning borrowers had asked to skip their monthly payments and tack the money due onto the end of their loans. The recently passed federal CARES Act of COVID-19 stimulus requires many lenders to do so.

Black Knight estimates that the average homeowner in forbearance is missing $1,663 in monthly principal, interest, taxes and insurance. Collectively, that means borrowers are skipping some $6.4 billion a month in payments.

By law, mortgage-servicing companies must pay the money during the next four months to those who hold most mortgage-backed bonds whether customers cover their monthly mortgage bills or not.

However, the number of homeowners falling into forbearance is rapidly growing. Black Knight found that more than 450,000 additional borrowers did so since just April 24.

All told, the company said 10.5 percent of all government-backed Federal Housing Administration and Veterans Administration mortgages are now in forbearance, as are 6.1 percent of those backed by government-sponsored enterprises Fannie Mae and Freddie Mac. Another 6.7 percent of mortgages backed by private lenders are in forbearance as well.

COVID-related economic woes are roiling the U.S. mortgage market in multiple ways. For instance, big lender Wells Fargo announced Thursday that it will no longer approve new home equity lines of credit. Experts also told Bloomberg that once the economy regains its balance, undoing all of the forbearance and other problems will create “chaos.”

Making the transition from forbearance to repayments means borrowers will look to modify their mortgages after the crisis is over. Requests for loan modifications could prove challenging for agencies that buy modified loans out of mortgage backed securities.