2.7 Million People Continually Postpone Their Mortgage Payments

Mish

Millions of homeowners are still pausing their monthly mortgage bills.  More might need help in the coming months.

Forbearance Plan Plateau

The Black Knight Forbearance Tracker shows 2.74 million homeowners were in active forbearance as of January 19. 

The number has vacillated between 2.71 and 2.83 million since early November, when the country began seeing new coronavirus case spikes and resulting shutdowns.

Breakdown of Mortgages in Forbearance

Estimated Monthly Advances

Forbearance Plan Breakdown 2021-01-25

Covid-19’s Financial Toll Mounts

The Wall Street Journal reports Covid-19’s Financial Toll Mounts as Homeowners Keep Postponing Mortgage Payments.

The proportion of homeowners postponing mortgage payments had been falling steadily from June to November, an indication that people were returning to work and the economy was beginning to recover. But the decrease has largely flattened since November, when the current wave of coronavirus cases surged in communities across the country.

For roughly the past two months, that group of homeowners has flatlined at about 5.5%, according to the Mortgage Bankers Association. Though that is down from a peak of 8.55% in June, some economists are concerned about the stalling forbearance rate—and worry that it could even start climbing if the economy further sheds jobs.

Mortgages by Stage of Forbearance

Mortgages by Stage of Forbearance

Forbearance Math 

80% of 2.74 million have extended forbearance. That's 2.2 million people who have not made payment for an extended period.

9.4% of FHA/VA loans are in forbearance.

How are any of the seriously behind people supposed to catch up? 

Most likely that can't and wont. Instead balances will at some point be rolled into new mortgages by the lenders, perhaps by an act of Congress.

Mish 

Comments (32)
No. 1-14
Bam_Man
Bam_Man

These will become 100-year mortgages.

Sechel
Sechel

I can't imagine this gets anywhere close to what we saw after 2005-2008

TexasTim65
TexasTim65

New Mortgages seems highly likely to me too.

Especially since rates are hovering around an all time low. Many of these mortgages were likely taken out a few years ago at higher rates. If the gov't mandates new mortgages, especially if the gov't covers the re-fi fee (or forces it to be done for nothing for certain borrowers - those without jobs) many may find they have lower payments than they did before even with accrued interest over the last year when they haven't made any payments.

Eddie_T
Eddie_T

I think you’re right about the solution. It looks like the 5.5% of homeowners who lost their access to paying jobs (and business bail-outs are going to lose their houses unless the government makes the mortgage lenders make modifications.....which they will, probably by adding payments on to the end of the loans.

Some smaller percentage share of that group will default anyway.

The difference I think, from 2008-2011...will be that prices will not drop as much....which will do a lot to keep the defaults from turning into a snowball.

After subprime only about a third of the people who lost homes managed to get back into them. So now we will probably see many of these new defaulters become part of the growing renter class.

Eddie_T
Eddie_T

COVID won’t affect RE long term as much as subprime did......unless we never beat it. Then all bets are off.

Eddie_T
Eddie_T

I have six houses in 5 widely separated Austin neighborhoods in close in burbs, counting my own house, and all are still showing rapid price appreciation trends right now, according to Zillow. My personal house (the most expensive) is rising the fastest.

I doubt we see prices drop much at all in this particular market...but I do expect them to flatten. This current trend is kinda scary. I’d like for it to flatten a little.

PostCambrian
PostCambrian

Kicking people out of their homes will only create more problems. One solution as Mish mentioned is a new roll-over mortgage. Another possibility would be equity sharing with the government if the government makes up the missing payments (I would only do this with owner occupied homes not rental/investment homes).

shamrock
shamrock

How many renters not paying?

RunnerDan
RunnerDan

The new paradigm is as soon as you save 2% down for a house, you "buy" it! Lose your job? Nob prob. Just chill out in the pad for as long as you need to get another one, then resume payments with a modified plan. Sure, you might accrue some fees which gets added to the "what you owe" column, but all that goes away once you sell and our government/banking sector are always making sure house prices will go up, so that problem will go away. Additional wiggle room for making prices go up can be had with longer loan terms (i.e., 50, 100, etc.) since Fed is already in a corner with respect to low interest rates.

rhcaldwell
rhcaldwell

Too much unnaturally-cheap debt on too-easy terms is driving up asset prices in every corner of the economy, from real estate to the financial markets. Human nature is to push things to the limit if allowed. My view is we’re up against that limit. As a nation, we’ve fallen for the “teaser rate” trick. The continuing wave of defaults can’t be swept under a carpet forever. Look out below!

KidHorn
KidHorn

The question is how many are unable to pay vs how many can pay but choose not to. I suspect many fall into both categories.

I thought the mortgages simply had the schedule pushed back. Are the mortgage holders on the hook for accrued principal and/or interest?

Realtallk
Realtallk

I'm conflicted, I don't necessarily want people to lose their homes but I'd like to buy one within the next two years. Prices are extremely out of line. If we were truly in a market driven economy, home prices would fall with increased foreclosures. Rent prices would also drop due to evictions...everything is artificial.

gttheo
gttheo

While those of us who were smart and waited out the bubble have to sit and wait more with artificially inflated prices with no true price discovery. BS.


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