Decline in Mortgage Forbearance Plans But Payments Drop Too

Mish

This week brought the first net decline in active forbearance plans since the crisis began. But mortgage payments declines as well.

According to the McDash Flash Forbearance Tracker, as of June 2, 2020, 4.73M homeowners, representing 8.9% of all mortgages are in COVID-19 mortgage forbearance plans. 

That’s down from 4.76M last week. The number of loans in active forbearance decreased by a net 34,000 over the past week, marking the first weekly decline since the CARES Act was enacted and the flood of forbearance requests began.

Black Knight CEO Anthony Jabbour Explains the Problem

"According to Black Knight’s McDash Flash Payment Tracker, far fewer homeowners in forbearance remitted May payments than did in April. If that trend holds true through the end of the month, the market should be prepared for another likely rise in the delinquency rate for May. Also, expanded unemployment benefits are scheduled to end on July 31. It remains to be seen how that will impact both forbearance requests and overall mortgage delinquencies.”

As of May 26, a significantly lower share of homeowners in forbearance had remitted May payments (just 22%) than did in April (46%), which suggests we’ll likely see another rise in the delinquency rate for May when the month’s full numbers come in in a couple of weeks. 

Unemployment Benefits

Continued Unemployment Claims in 2020  June 4

In regard to unemployment benefits, please note that Continued Unemployment Claims Rise to 21.5 Million.

Before Covid-19 hit , there were less than 3 million people collecting unemployment. There are now 21.487 million.

Mish

Comments (8)
No. 1-4
Casual_Observer
Casual_Observer

What if the banks decided that delinquencies couldn't happen if you had more then a certain amount of equity in the house.

Tony Bennett
Tony Bennett

"This week brought the first net decline in active forbearance plans since the crisis began."

...

True ... BUT

that number for "plans" (many received forbearance as option just in case needed ... and actually made payments) ... HOWEVER the number of people actually using forbearance went up ... dramatically.

...

Black Knight's survey tracks both the number of plans and those borrowers who make payments, whether in plans or not. It also considers past due forborne accounts as delinquent even though the CARES Act prohibits servicers from reporting them to credit agencies as such. In mid-May the company found that about 46 percent of borrowers in forbearance at the end of April had made at least a partial payment of that month's mortgage payment, apparently keeping forbearance as a safety net.

That did not continue in May. As of May 26, only 22 percent of homeowners in plans had made the months payment. Black Knight CEO Anthony Jabbour said, "If that trend holds true through the end of the month, the market should be prepared for another likely rise in the delinquency rate for May. Also, expanded unemployment benefits are scheduled to end on July 31. It remains to be seen how that will impact both forbearance requests and overall mortgage delinquencies."

Sechel
Sechel

I folllow the mortgage market but not as closely as I used to . Haven't seen anything that bad. After 2008 I can't imagine anything approaching it. Luckily we don't have fraud to worry about this go-around and prime mortgages have been underwritten better.

purelogic
purelogic

A lot of people are still waiting to get their unemployment benefits. I know people who are just getting their first payment and with the $600 bonus (starting with the first week of April), the minimum first payment you'll get is usually well over $5000. I wonder to what extent this is propping up the equity markets, reducing credit card debts, and avoiding mortgage forbearance. The NASDAQ may peak once they get through the backlog of unemployment benefits.


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