Mortgage forbearances drop 22% from May peak
There are 3.7 million U.S. homeowners with mortgages in forbearance this week, down 22% from May’s peak of 4.7 million, Black Knight said in a report on Friday.
The total weekly drop was 66,000 loans, a slower pace than the decline of 150,000 in the prior week, the report said. Measured as a share of all mortgages, 7% of home loans are in forbearance, down from 7.1% in the prior week, Black Knight said.
The forbearances rate for mortgages backed by Fannie Mae and Freddie Mac, known as government-sponsored enterprises, is 5% this week, down from 5.1% last week, the report said.
The rate for home loans in Ginnie Mae securities, primarily mortgages backed by the Federal Housing Administration or the Veterans Administration, is 11.3%, down from 11.5%. The forbearance share for mortgages held in bank portfolios or in private-label bonds is 7.4%, down from 7.5%.
“We’re seeing a bifurcation in the numbers, with GSE forbearances lower than the rates for the Ginnie space and the private-label space,” said Walt Schmidt, FTN Financial’s head of mortgage strategy.
The overall number of mortgages in forbearance has dropped as the jobs market gained, Schmidt said.
The unemployment rate in August was 8.4%, the lowest level since March. In April, the rate reached 14.7%, the highest in a Labor Department data series that goes back to 1948.
While the economy has added 10.6 million jobs since April, it’s not even halfway toward replacing the 22.2 million jobs lost between February and March, according to government data.
Most economists are predicting the soft jobs market will persist into 2021. Fannie Mae Chief Economist Doug Duncan forecasts the unemployment rate will average 8.8% in 2020 and 7.1% next year.
The CARES Act passed by Congress at the end of March gave mortgage borrowers the option of suspending their monthly payments for up to 12 months because of the pandemic. Borrowers just have to attest to their mortgage servicer that they have experienced a financial loss because of the health crisis.
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