More Than 8% of U.S. Mortgages Now in Forbearance

Home » Economic News » Money Management » More Than 8% of U.S. Mortgages Now in Forbearance

More Than 8% of U.S. Mortgages Now in Forbearance

With the United States economy still being pummeled by closures associated with the spread of COVID-19, many Americans are seeking financial relief. One potential option for homeowners who may be struggling is forbearance, which allows them to pause mortgage payments for up to 12 months. Now new data shows that a growing number of consumers are applying for this protection — regardless of whether or not they might need it.

As Marketwatch reports, as of May 10th, 8.16% of all mortgages were in forbearance according to the Mortgage Bankers Association (MBA). That’s not only up from 7.91% the week prior but also amounts to more than four million people. However new requests for forbearance have slowed, with MBA chief economist Mike Fratantoni noting, “There has been a pronounced flattening in loans put into forbearance — despite April’s uniformly negative economic data, remarkably high unemployment, and it now being past May payment due dates.”

Although the popularity of mortgage forbearance has increased drastically in recent months, a new survey suggests that the majority of homeowners requesting this protection may not actually need it. According to data from LendingTree, nearly 70% of surveyed homeowners currently in forbearance reported that the move wasn’t financially necessary. In fact a mere 5% said that they wouldn’t have been able to make their mortgage payments otherwise — however 26.2% said that they would have needed to skip other essential bills in order to make their mortgage payments if not for forbearance. Instead many homeowners stated that they “wanted a break from their normal payments.” As a result, 72% of respondents said they felt at least a little guilty about applying for forbearance, including 33.2% who reported feeling a lot of guilt about it.

While forbearance may sound like a no-brainer, some experts warn that their are downsides. For example, Forbes points out that those in forbearance may not be able to refinance their mortgages. That’s notable because mortgage rates have been falling — currently sitting at 3.28% (down from 4.07% a year ago) according to Freddie Mac. This led Money Management International director of business development Kate Bulger to tell Forbes, “The forbearance really is an emergency break. You don’t want to use it unless you really need it, and if you need it you should absolutely use it. If you need the forbearance to avoid missing mortgage payments and running the risk of foreclosure, then definitely use it.”

Ultimately, regardless of whether or not all of the homeowners who applied for forbearance have actually needed it, there are plenty who have required relief due to unemployment or other financial factors. Therefore it’s important not to throw the baby out with the bathwater. Instead we can all look forward to economic recovery that will reverse this trend and get Americans back on their feet.

Comments

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Author

Jonathan Dyer

I'm a small town guy living in Los Angeles looking to make solid financial decisions. I write for a number of finance websites, including HuffingtonPost and Business2Community. I founded DyerNews.com in 2015 to focus on personal finance and the emerging FinTech markets.

Other Articles by Jonathan Dyer

What is a 401(k) Loan and is it a Good Idea?

For many employees, their 401(k) plan is their main means of saving for retirement and it may also represent the bulk of their net worth. Given this reality, it's no wonder that some individuals might look at their retirement savings and wish that they could utilize some of those funds...

Sales of Existing Homes Fall to Near 10-Year Low

During these interesting times, are you in the market for a house? If not, you certainly aren't alone. As CNN Business reports (and according to data from the National Association of Realtors), sales of existing homes dropped by 17.8% in April compared to the previous month. Similarly sales were down...

FinTech Numerated Announces Automated PPP Loan Forgiveness

Among the many ways that the coronavirus pandemic has changed life in America and around the world is that it's made FinTech more relevant than ever before. From contactless payments becoming a growing preference to digital banking proving essential, these innovations have been thrust into the spotlight. Similarly, while select...