Gustan Cho The Mortgage Expert,
Publish On: June 29, 2020
BREAKING NEWS: Mortgage Forbearance On The Rise Due To Covid-19 Spike
After a few weeks of declining numbers, Mortgage Forbearance On The Rise due to the recent outbreak of the coronavirus.
- Dozens of states have reopened since late April after being shut down for over two months
- Worker’s high confidence levels triggered many workers not to take advantage of the federal forbearance program
- Under the CARES Act, homeowners affected by the coronavirus pandemic were eligible to apply for a mortgage forbearance for up to one year
- Forbearance is not mortgage forgiveness
- Forbearance means homeowners can skip mortgage payments for a certain period of time
- However, once the term is over, homeowners need to repay the missed payments and escrow shortage back
- Lenders will often offer an interest-free repayment plan where they can spread the missed payments over time
- The forbearance program under the CARES Act allows struggling homeowners to be eligible for forbearance for up to one year
In this article, we will discuss and cover Mortgage Forbearance On The Rise Due To Covid-19 Spike.
Mortgage Forbearance On The Rise Raises Concerns For Lenders
Lenders were content and under the belief, the secondary mortgage bond markets have stabilized due to decreasing weekly forbearance numbers the past several weeks.
- However, mortgage forbearance numbers have been skyrocketing in the past two weeks
- This is drawing serious concerns by mortgage lenders and servicers
- Just last week, mortgage forbearance numbers have skyrocketed by 79,000
- Forbearance numbers were dropping from May 15th until June 15th
- Then numbers started increasing
- Most states have reopened
- The reopening of states may have escalated COVID numbers
- A number of states such as Texas have ordered bars to close after the alarming increase of COVID positive tests
- Several counties in Florida have ordered beaches to be shut down after being reopened due to a high number of coronavirus cases
Shutting down certain businesses such as bars and gyms are hurting workers where unemployment numbers are expected to surge.
What Experts And Analysts Are Saying
The potential flood of forbearance panicked mortgage servicers.
How The Secondary Mortgage Markets Work
When borrowers do not pay their scheduled monthly mortgage payments, mortgage servicers still need to pay investors. Not only do servicers have to pay investors, but they also need to pay property taxes and insurance for borrowers who have escrow accounts. Mortgage servicers already have a set amount of mortgage payments defaults set aside and figure it is the cost of doing business. However, a flood of forbearance will bankruptcy any mortgage servicers. This is why the high number of forbearance in the past couple of weeks is worrisome for mortgage servicers.
This is a breaking story. If there are increases in mortgage forbearance in the upcoming weeks, the secondary mortgage bond markets can be disrupted. This will disrupt homebuyers and homeowners seeking residential loans and mortgage rates. We will keep our viewers updated in the coming days and weeks about this breaking news article. Stay tuned.
