Mortgage forbearance requests skyrocketed in early days after the passage of the CARES Act as homeowners seek financial relief in the face of the coronavirus pandemic.
Forbearance requests grew by 1,270 percent between the week of March 2 and the week of March 16, and another 1,896 percent between the week of March 16 and the week of March 30, the Mortgage Bankers Association announced Tuesday. The share of loans in forbearance grew from 0.25 percent to 2.66 percent between March 2 and April 1, according to MBA’s forbearance and call volume survey.
“MBA’s survey highlights the immediate relief consumers are seeking as they navigate the economic hardships brought forth by the mitigation efforts to stop the spread of COVID-19. … It is expected that requests will continue to skyrocket at an unsustainable pace in the coming weeks, putting insurmountable cash flow constraints on many servicers – especially IMBs,” said Mike Fratantoni, MBA’s Senior Vice President and Chief Economist.
IBMs – or independent mortgage bank servicers – have the largest share of loans in forbearance at 3.45 percent, as their loans focus on Federal Housing Administration and Veterans Affairs loans, which serve low- to moderate-income borrowers. Ginnie Mae loans grew the most, from 0.19 percent to 4.25 percent.
The $2 trillion CARES Act signed by President Trump 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. The law requires lenders to approve forbearance if requested by the borrower, touching off a scramble by homeowners as bills came due this month.
The Mortgage Bankers Association estimates that the burden on lenders could range from $75 billion to $100 billion or higher if one-quarter of borrowers take advantage of forbearance for six months or longer.
An array of mortgage, real estate and housing organizations called on federal regulators to ensure cash is available to mortgage lenders who may financial support as they help homeowners and renters during the coronavirus pandemic. Fifteen organizations urged the Federal Housing Finance Agency, the Federal Reserve and the Department of Treasury to create a liquidity facility to support lenders that are providing relief under the CARES Act.
“To ensure that millions of Americans receive the support they need during the pandemic, it is incumbent upon the government to provide a lending facility to support the mortgage forbearance burdens placed on single-family and multifamily servicers, as they still need to forward principal and interest payments to investors,” Frantoni said.
MBA began a weekly survey of forbearance and call center activity the week of April 1, covering 22.4 million loans – or almost 45 percent of the first mortgage servicing market.