Coronavirus mortgage bailout sees steepest drop in a week

A man walks past the U.S. Capitol building in Washington, June 25, 2020.

Al Drago | Reuters

The number of homeowners on government and private sector mortgage bailouts fell for the second week in a row as borrowers who arrived earlier saw their plans expire.

However, more and more borrowers are getting extensions to these initial three-month plans, proving that the pain in the market is not over yet.

As of Tuesday, the volume of active forbearance loans, in which borrowers are allowed to delay their monthly payments, declined by 435,000 from the previous week, according to Black Knight, a mortgage data and technology company. This is the biggest drop in a week to date.

About 4.14 million loans were forborne, representing 7.8% of all active mortgages, up from 8.6% the week before. This is the lowest amount since April 28. Together, these loans represent just under $ 900 billion in outstanding principal.

By category, approximately 6% of all mortgages backed by Fannie Mae and Freddie Mac and 11.6% of all FHA / VA loans are subject to forbearance plans. A little more than 8.2% of loans on private labels or bank portfolios are also subject to forbearance. Biggest drop in abstentions are on Fannie and Freddie mortgages, down 200,000 in the week

“The reduction of around 435,000 was driven at least in part by the fact that more than half of all active forbearance plans entering the month were due to expire at the end of June,” Andy Walden said. , economist at Black Knight. “While the majority of these have been extended, this week’s data suggests that a significant portion was not.”

More than 26% of the forborne loans were extensions, according to a Mortgage Bankers Association tally for the week ending June 28. This share has increased steadily over the past three weeks.

The bulk of the forborne loans are government backed and part of the CARES law mortgage bailout program, which President Donald Trump signed into law in March. It allows borrowers to miss monthly payments for at least three months and potentially up to a year. These payments can be made either as part of repayment plans, loan modifications, or when the home is sold or the mortgage is refinanced. For unsecured government loans, most banks and private lenders have similar plans in place.

While the decline in active mortgage abstentions is encouraging, recent spikes in coronavirus cases in various states, in addition to the expiration of increased unemployment benefits at the end of this month, pose a significant risk to the mortgage market recovery. .

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