The number of loans in forbearance continues to outpace regulators’ expectations, with an estimated 3.4 million homeowners pushing pause on mortgage payments amid the coronavirus pandemic, according to data released Friday by Black Knight.
According to the firm’s forbearance tracker, 6.4 percent of all mortgages have entered into forbearance as of April 23 – up from 5.5 percent a week ago. On March 2, roughly 0.25 percent of loans were in forbearance.
Black Knight reports that 1.57 million Fannie and Freddie loans are in forbearance, making up 5.6 percent of their share of the mortgage market. Federal Housing Finance Agency Director Mark Calabria said early this month that he expected no more than 300,000 Fannie and Freddie loans to fall into forbearance in April.
In response to the growing numbers and significant pressure from lenders and lawmakers, FHFA announced this week that mortgage lenders will only have to cover four months of missed payments from borrowers under forbearance during the coronavirus pandemic. The change applies to all mortgage lenders managing Freddie Mac or Fannie Mae backed loans.
FHFA said that mortgage servicers with Fannie and Freddie loans will have “no further obligation to advance scheduled payments” to creditors after four loan payments have been missed. In short, the announcement means the loans in forbearance due to the coronavirus can be kept in mortgage-backed security pools as long as they are in forbearance.
Even with the change, Black Knight estimates that servicers of these mortgages could still be on the hook to creditors for more than $7 billion in advances on behalf of borrowers in forbearance.
“Having a four-month end date on the period in which servicers need to advance principal and interest payments on behalf of homeowners in forbearance is extremely helpful to our servicing clients,” Black Knight CEO Anthony Jabbour said. “Still, even knowing that time limit, with today’s number of forbearance plans, servicers are still looking at more than $7 billion dollars in advances over those four months. And the forbearance numbers are climbing steadily, day by day. Clearly, this remains a challenging situation all around.”
The $2 trillion CARES Act comes with significant benefits for homeowners who are unable to make their mortgage payments, most notably a moratorium on foreclosures and the right to forbearance. Forbearance allows borrowers with a federally backed mortgage to put off payments for at least six months if they suffer economic hardship during the pandemic.
However, lenders are required to repay creditors – creating a liquidity shortfall if borrowers aren’t making payments.
Black Knight said 8.9 percent of all FHA and VA loans – or 1.07 million – are in forbearance.