Number of Americans skipping mortgage payments falls below 4M for first time since May
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The number of homeowners who are temporarily skipping their mortgage payments fell below 4 million for the first time since May, suggesting the nation's households are gradually recovering from the coronavirus pandemic and related lockdown.
A weekly survey from Black Knight found that 7.4% of total loans, or 3.9 million homeowners, are now in forbearance plans, down from 7.5% the previous week.
The pace of forbearance plans has slowed as the nation's economy rallies after a crippling downturn, which saw more than 30 million Americans join the unemployment rolls.
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A separate study released by the Mortgage Bankers Association on Monday found that 3.7 million homeowners, or 7.44%, are in forbearance plans.
"The share of loans in forbearance declined at a more rapid pace last week, with many borrowers who had been making payments while in forbearance deciding to exit. New forbearance requests increased, but are still well below the level of exits," Mike Fratantoni, MBA's senior vice president and chief economist, said in a statement.
Under the $2.2 trillion CARES Act passed by Congress at the end of March, affected homeowners with a federally backed home loan can skip or delay mortgage payments for up to a year. But lawmakers have cautioned that forbearance is not forgiveness: At some point, homeowners will owe the payments they chose to temporarily suspend.
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At the end of the forbearance plan, homeowners will be provided with several options to compensate for the missed payments -- but will not be required to pay everything back all at once in what’s known as a “balloon payment,” according to mortgage giant Fannie Mae. Frequently, mortgage lenders tack the unpaid balance from the forbearance period onto the end of the loan.
“We want every homeowner who is struggling because of this pandemic to know they have mortgage options,” Fannie CEO Hugh Frater said at the end of April. “We do not require a homeowner to repay missed payments all at once at the end of the forbearance plan, unless they choose to do so.”