Fewer Homeowners Request Mortgage Forbearance
In a surprise, homeowners have weathered the economic downturn better than many feared. Though the broader economy has contracted by over 30%, very few homeowners missed their mortgage payments. The number requesting permission to skip making payments has also fallen. However, according to recent media reports, that trend might be starting to change as some borrowers show signs of financial strain.
Forbearance Programs Have Helped
When the coronavirus began to spread, many mortgage servicers created forbearance plans for their borrowers. These plans allowed them to delay or reduce monthly payments. Forbearance is temporary, and the expectation is that borrowers will make up the payments later. However, forbearance helps people stay out of default and avoid foreclosure.
Anyone with a federally-backed mortgage was eligible for forbearance. Many private mortgage providers also created forbearance plans.
These programs have proved popular. However, the share of homeowners who have requested forbearance have fallen in the past couple of months. This drop indicates that the financial condition of many borrowers has improved.
Some Communities Are Still Struggling
Ginnie Mae loans have been an exception. The share of Ginnie Mae loans in forbearance has increased by a basis point to 10.28%. This means that slightly more than 1 in 10 Ginnie Mae loans are in forbearance.
Ginnie Mae operates in a similar fashion to Fannie Mae and Freddie Mac. It bundles mortgage loans made through the Department of Veterans Affairs, the Federal Housing Administration, and the Department of Agriculture. It then sells these loans as securities to investors. Ginnie Mae has made many loans to non-white communities and to families with lower incomes. The loans also have had lower borrowing requirements, such as lower credit scores.
The rise in forbearance rates in this housing segment suggests that they continue to feel the brunt of the economic downturn. Unlike other homeowners, they haven’t been able to return to their normal payment schedule as easily. Fortunately, the program continues to exist to help them through the choppy waters.
What to Do if You Cannot Make Your Payment
We encourage borrowers to reach out to their mortgage servicer if they suspect that they cannot make their mortgage payment. If ever a mortgage servicer would be sympathetic, now is the time. Complete the paperwork as soon as possible and ask any questions that you have.
What happens if your forbearance period ends and you still cannot pay your mortgage? Some options include:
- Selling your home and buying something cheaper or renting. This might not be ideal, since a cold real estate market could lead to lower prices.
- Requesting a loan modification. This was a popular option even before the pandemic. A modification can adjust the length of the loan, interest rate, or the amount of a monthly payment.
- Refinancing to a lower interest rate. According to the Federal Housing Finance Agency, those who took a forbearance will not be penalized when it comes to refinancing a mortgage. You might be able to refinance to a lower rate, which can save hundreds every month in payments.
Contact Us if You are Afraid of Losing Your Home
The Plantation bankruptcy attorneys at Nowack & Olson have helped many homeowners avoid foreclosure. Don’t let the pandemic rob you of your dream of passing your home on to your children. Call us today at 888-813-4737 to schedule a free consultation.