Nearly 4 million homeowners no longer pay their mortgages

(CBS News) – A growing number of US homeowners have defaulted on their mortgage payments as layoffs surge across the country and more households face financial trouble.

Nearly 4 million people, or just over 7% of mortgage holders, have sought relief on their home loans as of April 30, according to housing data provider Black Knight. That’s a sharp increase from early March, when fewer than 150,000 mortgages were in forbearance.

The number is only expected to grow, with May payments due soon and the nation’s unemployment rate rising. it is expected to reach 15% to 20%.

“More than 26 million Americans filed for unemployment in the past month, leading nearly 7 percent of all mortgage borrowers to apply for forbearance plans,” said Mortgage Bankers Association Chief Economist Mike Fratantoni, in a statement earlier this week. “For Veterans Affairs and Housing Federal Administration borrowers, the proportion of loans in forbearance is even higher, at 10 percent.”

The Coronavirus Aid, Relief, and Economic Security Act, or CARES, allows homeowners to apply for reduced or suspended mortgage payments for up to 12 months without incurring fees or penalties if their mortgages are backed by Fannie Mae and Freddie Mac. applies to single-family or condominium mortgages. Some other government mortgage loans, such as those backed by the Department of Veterans Affairs. they are also eligible for leniency.

The CARES Act does not protect mortgages that are not backed by the government, which account for about half of all mortgages nationwide. About 1.7 million of the forbearance loans are backed by Fannie or Freddie, while VA and Federal Housing Authority loans account for another 1.6 million, according to Black Knight.

Black Knight said in an April report that the coronavirus pandemic has affected the housing market. Along with homeowners skipping payments, fewer home seekers are applying for mortgages. Before the virus, mortgage defaults and delinquencies were near record lows.

Other homeowners who have obtained mortgage relief from their lenders or loan servicers express concern about owing thousands of dollars in a balloon payment after the forbearance period ends. That’s not the only payment option under the CARES Act. Housing executives emphasize that borrowers can also arrange payment plans in installments or obtain an extension, among other options.

“We do not require an owner to pay back payments in one lump sum at the end of the forbearance plan, unless they choose to do so,” Fannie Mae CEO Hugh Frater said in a statement this week. “We want all homeowners who are struggling through this pandemic to know that they have mortgage options.”

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