NEW YORK–A large number of the more than 2.7 million active mortgage forbearance plans currently in effect are set to expire in the coming months even though many of those mortgage-holders remain out of work or are earning less than they did prior to the pandemic.
According to an analysis compiled by mortgage data firm Black Knight, more than half of those 2.7 million mortgages in forbearance are set to end in March, April, May or June of this year. Mortgage forbearance under many plans last a maximum of 12 months.
“The biggest concern in my eyes is the number of folks whose forbearance programs are going to end this spring,” Ralph McLaughlin, chief economist at Haus, a home-finance startup, told The Wall Street Journal. “Those that were hit the hardest early on and still haven’t found a job are going to be in dire straits.”
As CUToday.info has reported, 2020’s CARES Act allowed borrowers to postpone payments on federally backed mortgages for as long as 12 months. About 75% of U.S. mortgages are guaranteed or insured by the U.S. government, according to the Black Knight analysis cited by the Journal. Close to one in 10 homeowners signed up for forbearance at the peak of the program’s use last June.
Continuing to Struggle
While the agreements have worked for many homeowners and allowed them to remain in their homes, others continue to struggle, with the Journal reporting fewer borrowers exited their forbearance plans in recent weeks, and the share of Americans unemployed for more than six months continuing to rise, the Journal reported.
“The hope is that people will be back to employment, to some form of income aside from unemployment benefits or stimulus payments, so they can qualify for modifications,” Marcel Bryar, founder of consulting firm Mortgage Policy Advisors, told the Journal. “If you can’t get a job at the end of that forbearance, the reality is you’re not going to have the income to afford even a modification because nothing would be affordable to you.”
FHA Loan Borrowers Hit Hard
The report noted that many of the borrowers who are still postponing payments have Federal Housing Administration loans, and those borrowers typically have lower incomes and smaller down payments than Fannie Mae and Freddie Mac borrowers. As job losses during the pandemic have disproportionately affected low-wage workers, they are expected to be particularly vulnerable when forbearances expire.
Meanwhile, even if forbearance plans are extended, some homeowners will still end up facing foreclosure when their plans eventually expire, economists and industry consultants told the Journal.
The Biden administration said last week that it plans to gather representatives from the housing agencies in the coming days to develop a plan around the expiration of forbearance, according to a White House spokeswoman.