After the number of borrowers struggling to make their monthly mortgage payments improved significantly in July, it has essentially declined and is now threatening to increase.
As of Aug. 25, 3.9 million homeowners were in mortgage forbearance programs, according to Black Knight, a mortgage technology and analysis company. This corresponds to 7.4% of all active mortgages and is unchanged from the previous week. The numbers haven't improved in the past two weeks.
More worryingly, nearly three quarters of the Forbearers have extended their term in office from the first three months. This suggests that their financial situation is not improving and they are still unable to make their monthly payments. Another survey by the Mortgage Bankers Association found that the rate of improvement is slowing significantly.
"The extremely high rate of initial unemployment insurance and high unemployment remains a concern and an indication of the challenges facing many households," said Mike Fratantoni, chief economist at MBA. "While new forbearance requests, particularly for loans from Fannie Mae and Freddie Mac, remain low, the pace of forbearance exits has slowed for two weeks."
Borrowers in the government bailout are not required to remit payments immediately after the forbearance ends. Instead, these payments can be made when the loan is either refinanced or the home is sold.
The CARES law mortgage rescue package allows borrowers to postpone monthly payments for government-secured loans for up to a year. For the most part, banks and private label securities have been lenient for about six months, but it is unclear how long they will extend that.
Broken down by loan type, a reduction of 23,000 borrowers at Fannie Mae and Freddie Mac was almost completely offset by an increase in FHA forbearance of 10,000 borrowers and an increase of 12,000 loans in bank and private label loans.
In the past 30 days, Active Forbearances have fallen by 171,000, with Fannie Mae and Freddie Mac loans improving the most. More modest improvements were noted for FHA / VA forbearances as well as bank and portfolio loans.
The big concern is that the extended unemployment benefit has now expired and some borrowers are using it for their monthly payments. Without additional support, the rescue figures for mortgages could rise again, according to experts.