CINCINNATI–A nun who works on the front lines of housing and a national analyst who tracks mortgage and housing trends both see big problems in the near future when various mortgage forbearance programs expire by year-end.
"Many people are going to be in a world of trouble, there’s no question about that,'' Sister Barbara Busch, executive director of the HUD-certified housing counseling service in the South Cumminsville neighborhood of Cincinnati, told the Cincinnati Enquirer.
Busch told the Enquirer she’s seen some “disturbing trends” among local residents who have been flocking to her organization for help in the wake of COVID-19-induced business shutdowns and job losses. Many of them had signed up for mortgage forbearance plans initiated by the federal government under the CARES Act, which allowed borrowers with mortgages backed by Fannie Mae or Freddie Mac to delay monthly payments for up to six months without penalty, after which they can request an additional 180 days, if needed.
But forbearance is not forgiveness, and Busch fears hundreds of her clients, many of whom work in blue-collar industries hardest hit by the pandemic, simply won't be able to repay missed payments and be forced to default on their loans, the Enquirer reported.
“In December, when the federal order is gone, we’re going to see a huge number of filings for foreclosure,’’ Busch told the Enquirer.
‘Start Planning an Exit’
Busch is encouraging her clients with the ability to pay to start planning to exit forbearance and work out loan modifications with their lenders to make repaying the money less of a financial hardship.
The Enquirer report pointed to data from Black Knight showing approximately 3.7 million homeowners remained in forbearance plans by mid-September, down from a peak of about 4.7 million in late May. And those in forbearance represented about 7% of all mortgages, and $781 billion in unpaid principal, the Black Rock Data show.
Jay Pascoe, executive director of the Ohio Mortgage Bankers Association, told the Enquirer those numbers worry him, pointing out many homeowners who succeeded in obtaining forbearance didn't need it, unnecessarily putting their homes in jeopardy.
"If a homeowner can make their mortgage payment, they should do so,'' Pascoe told The Enquirer. "By seeking unnecessary forbearance on a mortgage an individual can clearly afford to pay, it could possibly result in a financial hardship down the road when those missed payments must be repaid.''
Busch told the Enquirer that based on her negotiations with lenders, she believes most homeowners in forbearance will be asked to make additional monthly payments.
That's still going to be a challenge for many of her clients, she said. "If they can’t afford their current mortgage, the chances that they can essentially make payments on two mortgages in December aren’t good.’’
‘That Can’t Last’
A recent survey gives some idea of how many Ohio homeowners continue to struggle.
According to the U.S. Census Bureau’s Household Pulse Survey, only about a third of respondents said they could continue to count on jobs and other income to pay their mortgage bills, with the rest depending on credit cards or loans, using money from savings or selling assets, borrowing from friends and family or utilizing stimulus money or unemployment benefits.
That can't last, Frank Martell, president and CEO of housing data tracker CoreLogic, told the Enquirer.
"Americans continue to tap into savings to stay current on their home loans,'' Martell said. "However, given the unsteadiness of the job market, many homeowners are beginning to feel the compounding pressures of unstable income and debt on personal savings buffers, creating heightened risk of falling behind on their mortgages."
CoreLogic's latest research on mortgage delinquencies indicate many homeowners are already on the precipice of foreclosure, the Enquirer reported, pointing to CoreLogic's Loan Performance Insights for July 2020, which found serious delinquencies – those 90 days or more past due – reached 4.1%, its highest rate since April 2014.
Great Recession 2.0? No.
One person told the Enquirer that at least in Cincinnati the market will not see the same kind of housing carnage as occurred in the Great Recession.
"We're going to see some foreclosures. It's not going to be pretty, but it's not going to be as ugly as it was in the past,'' Donna Deaton, a veteran Realtor with ReMax Victory told the Enquirer. Deaton said homeowners are in much better shape now.