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Nearly 5m Now in Forbearance Due to Pandemic, Says Survey

Less than a quarter of homeowners in forbearance have managed to make payments for May, according to fintech firm Black Knight

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  • Written by  Banking Exchange staff
Nearly 5m Now in Forbearance Due to Pandemic, Says Survey

More than 4.75 million households across the US are in forbearance due to the COVID-19 pandemic, according to research by software provider Black Knight.

The figure amounted to approximately 9% of all mortgages and just over $1 trillion in unpaid principal balances, the fintech company reported, with 93,000 added over the week to May 19.

However, the rate of increase was dropping, Black Knight said. In the first week of May, 325,000 households went into forbearance, while 1.4 million did so in the first week of April.

The slowdown suggested a required shift in focus from “forbearance pipeline growth to forbearance pipeline management”, the fintech company said.

Despite the high levels of forbearance, almost half of households that had requested delays to payments had managed to pay their mortgage in April, Black Knight’s McDash Flash Payment Tracker showed.

Approximately 1.4 million homeowners in forbearance who managed to make April payments were at risk of missing instalments in May, however. This could lead to a sharp increase in the delinquency rate for mortgages across the US, Black Knight said.

Since mid-March, banks have been introducing measures to help borrowers ride out the effects of the pandemic. These have included mortgage payment holidays and temporary suspensions of foreclosure activity.

In their first-quarter results, US banks have increased their loan loss provisions substantially in anticipation of difficult months ahead for borrowers of all kinds.

“While it appears – at least for the time being – that the surge of forbearance requests has begun to slow, for our servicing clients, it is the beginning of an entirely new challenge,” said Anthony Jabbour, CEO of Black Knight. “Shifting to the management of such a large pipeline of homeowners in forbearance plans is paramount.”

Mortgage groups including Freddie Mac and Fannie Mae have introduced forbearance arrangements that allow for payment reductions or suspensions for up to 12 months. In addition, some home loans have been granted the ability to delay forborne mortgage payments until the sale or refinancing of the home or the maturity of the loan.

The Federal Housing Finance Agency announced earlier this month that it would extend its existing moratorium on foreclosures and evictions until at least June 30.

Meanwhile, sales of existing homes dropped dramatically in April, according to the National Association of Realtors. Sales dropped 17.8% month-on-month, the biggest decline in almost a decade.

Housing starts fell by more than 30% in April compared to March, according to data from the US Census Bureau. It recorded 891,000 starts during last month, down from almost 1.3 million in March. The biggest declines were seen in the Northeast (42.6%) and the West (43.3%).

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