About two million homeowners are skipping their monthly mortgage payments, according to industry data released on Monday, a number that is forecast to rise further as more Americans lose their jobs as a result of the coronavirus pandemic.
Approximately 3.74% of home loans are in forbearance as of April 5, according to Mortgage Bankers Association data, up from about 2.73% the prior week.
“[T]he number of borrowers asking for forbearance will likely continue to rise at a rapid pace,” said Mike Fratantoni, MBA’s chief economist.
The industry group represents nonbank companies such as Quicken Loans Inc. and Freedom Mortgage Corp. that act as middlemen between borrowers who make monthly payments and investors who ultimately receive them. Its survey reflects a sample size of roughly 27 million loans, or slightly more than half of the overall number of “first mortgages” used to purchase homes.
The $2 trillion stimulus package passed by Congress last month allows homeowners who face hardship from the pandemic to request forbearance from the companies that service their mortgages, meaning they can suspend payments without penalty for as long as 12 months.
When a homeowner misses a payment, the mortgage servicers are still on the hook to pay investors. Although they are ultimately reimbursed, the process can take months. The firms originate about 60% of U.S. mortgages and service the majority of loans insured by the Federal Housing Administration, which caters to lower-income and first-time home buyers.
The stimulus bill provided no assistance to mortgage servicers, and the companies say they might have to come up with tens of billions of dollars to meet their obligations to investors if enough homeowners stop making payments.
The MBA and other industry players are pressing the Federal Reserve to support mortgage servicers via an emergency lending facility similar to those it has extended to other industries.
A decision to do so would depend on officials’ assessment of the companies’ importance to the housing market. A bipartisan group of senators last week urged regulators to “take urgent and immediate action” to avoid a housing-finance crisis.
Fed Chairman Jerome Powell on Thursday noted that the mortgage companies make up “a key market that does support households and consumer spending, really, which is of course 70% of the economy.”
Mark Calabria, a top federal housing regulator, has indicated that the companies are unlikely to get help from government-controlled mortgage giants Fannie Mae and Freddie Mac, which guarantee nearly half of mortgages.