This article has been updated
The mortgage delinquency rate is going up. The Mortgage Bankers Association’s most recent survey found 4.36 percent of outstanding loans were delinquent at the end of the first quarter. The number of loans in forbearance is also rising. The association’s latest survey showed nearly 8 percent of loans or almost 4 million homeowners are now in forbearance plans.
The numbers are bad, but they could be worse. The U.S. economy shed 20 million jobs in April and the unemployment rate spiked to its highest level since the Great Depression. And yet not as many homeowners as expected have stopped paying their mortgages or sought forbearance.
“We are not getting enough hysterical calls [from homeowners saying] that ‘I can’t pay my mortgage,’ ” said Marian Siegel of Housing Counseling Services, a Washington-based nonprofit organization that helps homeowners prevent foreclosure in the District, Maryland and Virginia. “We believe that people think that there’s all these programs, so it’s not really a problem. We’re trying to change that message. … This is not the time to sit back and wait. This is really a period to act quickly when you know you are not going to be able to pay your mortgage.”
Part of the problem could be that few homeowners understand what forbearance is, so they are reluctant to ask for it.
“Applying for some of these programs can take 30 to 60 days,” Siegel said. “Waiting to see what happens is not the best advice because we — all the housing counselors in the universe — will be inundated. … We have to flatten the curve of people seeking forbearance.”
Many borrowers won’t have to make missed mortgage payments all at once
What is forbearance?
Forbearance allows a borrower to suspend their mortgage payments temporarily because of a financial hardship. It does not mean those payments are erased. The borrower is required to repay any missed payments in the future. Siegel said too often borrowers are “confusing forgiveness and forbearance. They’re not understanding that [the payment] doesn’t go away.”
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