The mortgage industry is experiencing a significant impact due to job losses driven by the virus spread. According to a recent Forbearance and Call Volume Survey from the Mortgage Bankers Association (MBA), the number of loans in forbearance spiked from 2.73 percent to 3.74 percent from March 30 to April 5.
“The nationwide shutdown of the economy to slow the spread of COVID-19 continues to create hardships for millions of households, and more are contacting their servicers for relief in accordance with the forbearance provisions under the CARES Act,” said Mike Fratantoni, MBA’s senior vice president and chief economist. “The share of loans in forbearance grew the first week of April, and forbearance requests and call center volume further increased. With mitigation efforts seemingly in place for at least several more weeks, job losses will continue and the number of borrowers asking for forbearance will likely continue to rise at a rapid pace.”
The rise in forbearance occurred just a week after Congress passed the CARES Act, which allows some homeowners with federally-backed mortgages, who are facing hardship due to the pandemic, to suspend their mortgage payments without penalty for up to 12 months.
CoreLogic’s recent monthly Loan Performance Insights Report highlights the stark difference from last year. In 2019, the mortgage market experienced strong improvement. The January 2020 delinquency rate dropped by a 0.5 percentage point from January 2019 when it was 4 percent—marking 25 consecutive months of annual declines and the lowest delinquency rate in over 20 years.
“Home loan delinquency and foreclosure rates were the lowest in a generation before the COVID-19 pandemic hit,” said Dr. Frank Nothaft, chief economist at CoreLogic. “Recession-induced job losses will fuel delinquencies. However, wide-spread foreclosures across America will likely be averted because of the home equity buffer that homeowners have and the available forbearance programs. Our Home Equity Report found that at the start of 2020, homeowners with a mortgage also had an average of $177,000 in home equity.”
“After some initial cushioning from equity buffers, lower mortgage interest costs and government support and forbearance programs, we expect delinquency rates to jump significantly throughout the year as the economic toll from COVID-19 becomes more evident,” said Frank Martell, president and CEO of CoreLogic. “It is likely that areas of the country that have local economies driven by energy, transportation and media and entertainment will lead the way in delinquencies. The ultimate extent of the higher delinquencies will depend on how quickly the broader economy opens up again and employment levels rebound—both of these factors are uncertain at this time.”
While much remains unknown about the long-term impacts of COVID-19, the real estate industry is taking any changes in stride, adapting as quickly as possible to best serve their consumers.
“There was a decline in call center hold times and abandonment rates in the latest survey, which indicates the mortgage industry is adapting to the current environment by adding or reallocating staff and increasingly utilizing its websites to help borrowers,” said Fratantoni.
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Liz Dominguez is RISMedia’s senior editor. Email her your real estate news ideas at email@example.com.