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As Unemployment Claims Rise, So Do Missed Mortgage Payments

April 19, 2020

As Unemployment Claims Rise, So Do Missed Mortgage Payments

Over 22 million people have filed for unemployment benefits in the past 4 weeks. Many struggle with payments.

Black Knight reports More than 2.9 Million in Forbearance, 5.5% of All Mortgages

Key Details 

  • As of April 16, more than 2.9 million homeowners – or 5.5% of all mortgages – have entered into COVID-19 mortgage forbearance plans
  • This population represents $651 billion in unpaid principal and includes 4.9% of all GSE-backed loans and 7.6% of FHA/VA loans
  • At today’s level, mortgage servicers would be bound to advance $2.3 billion of principal and interest payments per month to holders of government-backed mortgage securities on COVID-19-related forbearances
  • Another $1.1 billion per month in lost funds will be faced by those with portfolio-held or privately securitized mortgages

Forbearance Totals

Black Knight Forbearance Totals 2020-04-16

Payment Forbearance Under Cares Act

On March 27, 2020, President Donald Trump signed the Coronavirus Aid, Relief, and Economic Security Act (also known as the CARES Act) into law. A provision of the CARES Act allows borrowers with federally backed mortgages to request temporary loan forbearance for up to 180 days. Borrowers also have the right to apply for an extension of another 180 days of forbearance. 

Once a borrower requests hardship forbearance due to the COVID-19 pandemic, the act requires the servicer to offer a CARES Act forbearance. 

Pitfalls 

Forbes warns of Mortgage Forbearance Pitfalls. 

John Ulzheimer, an Atlanta-based credit expert formerly of FICO and Equifax, warns of a potential balloon payment.

“If the lender or servicer demands that you pay back the deferred amount all at once or in an otherwise expedited manner, that could be impossible for the borrower.” 

Unfortunately, having a mortgage servicer ask for a “balloon” payment once your forbearance period ends is a very real possibility. Borrowers from multiple national banks have reportedly been informed of the need to repay any delayed payments in a lump sum at a future date.

Three Things Not to Do

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