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Mortgage Forbearance Requests Spike as Americans Lose Jobs

Unprecedented numbers of homeowners are seeking mortgage assistance as desperate and drastic efforts to limit the spread of the coronavirus have resulted in record job losses.

Mortgage forbearance requests shot up 1,270% between the weeks of March 2 and March 16, according to the Mortgage Bankers Association, a national trade group. (The data is based on a weekly survey of forbearance and call center activity in the week of April 1. It covers 22.4 million loans.) As the economy continued to falter, with a slew of nonessential businesses closed across the country, forbearance requests surged an additional 1,896% between the weeks of March 16 and March 30.

Forbearance allows borrowers to miss several months of payments if they’re suffering a hardship and their mortgage servicer has approved it. But that money is typically due in a lump sum at the end of the forbearance period.

“Obviously, there’s going to be massive take-up on the forbearance program,” says Mark Zandi, chief economist of Moody’s Analytics. “There are a lot of homeowners who are unemployed, have lost hours, are having their wages cut, and need lots of help.”

Due to the deluge of requests, the number of loans in forbearance went from 0.25% of all mortgages to 2.66% from March 2 to April 1, according to MBA. That’s likely because the federal government stepped in to help struggling homeowners who may have lost income or jobs in this crisis.

“MBA’s survey highlights the immediate relief consumers are seeking as they navigate the economic hardships brought forth by the mitigation efforts to stop the spread of COVID-19,” MBA’s chief economist, Mike Fratantoni, said in a statement. “It is expected that requests will continue to skyrocket at an unsustainable pace in the coming weeks.”

Last month, the Federal Housing Finance Agency allowed homeowners suffering from financial hardship due to COVID-19 to receive up to 12 months of forbearance on their mortgages. Homeowners won’t have their late payments reported to credit bureaus, which could lower their scores, or be charged late fees. The help was only for those with single-family homes backed by FHA, Fannie Mae, Freddie Mac, U.S. Department of Agriculture, and U.S. Department of Veterans Affairs loans.

Many other lenders who have issued or are servicing non-Fannie and non-Freddie loans are following suit.

In addition, hold time on calls with mortgage servicers went from under 2 minutes to 17.5 minutes, according to MBA. People on Twitter have complained of having to wait much longer, even up to five hours. One tweeted about getting a hold message estimating a nearly 44-hour wait time to speak with a Chase representative.

“Homeowners who are having difficulty making mortgage payments should reach out to their lenders to work on a plan,” says realtor.com Chief Economist Danielle Hale. “You may have to wait for a while before getting your lender on the phone, but be persistent.”

Moody’s Zandi anticipates that about 15 million homeowners will receive mortgage forbearance as this crisis drags on. That’s about 30% of all residential, single-family mortgages.

If additional government action isn’t taken and homeowners continue struggling to pay their bills, Zandi worries there could be a surge in foreclosures in the future.

“There will be a lot of credit problems down the road, delinquencies, defaults, and foreclosures,” says Zandi.

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