The economic slowdown caused by coronaviruses has a major impact on owners. And the worst may still be to come.
A new report from the British economic forecasting company Oxford Economics He estimates that 15% of homeowners will fall behind on their monthly mortgage payments. If this prognosis materializes, the mortgage failures caused by the coronavirus pandemic would exceed the number observed during the Great Recession. At the time, the maximum delinquency rate was 10%.
According to the latest data from the Association of Mortgage Bankers, an industry professional group, nearly 4 million homeowners are currently receiving leniency plans, accounting for 7.54% of all Mortgages. With regard to loans guaranteed by Ginnie Mae, that number stands at almost 11%; These include loans from the Federal Housing Administration and veterans.
The stimulus legislation signed by President Donald Trump allows any borrower with a federally supported mortgage to request a tolerance of up to 12 months, which means that the owner can default or make reduced payments. during this period.
Given the risk facing mortgage companies right now, many lenders have placed more stringent requirements on loan applicants. "Uncertainty in the mortgage market has contributed to a significant tightening of lending standards which could persist even after its recovery," wrote Oxford Economics.
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The pace of forbearance requests has slowed in recent weeks after April's breakneck speed, but that could change, experts warned. "Although the pace of tolerance requests has slowed this week, the volume of calls has increased, which could be a sign that more borrowers are calling to check their options now that the May deadlines have arrived," a explained Mike Fratantoni. , chief economist at the Association of Mortgage Bankers, said in the report.
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The wave of leniency applications and delinquent loans has put tremendous pressure on administrators, businesses that collect monthly payments and distribute them to investors who own the loan, including mortgage-backed securities.
and Freddie Mac
It has taken steps to reduce the burden on managers, who should still send payments to investors for four months after a borrower stops paying or makes a leniency agreement.
Good news for homeowners: while Oxford Economics has said that an increase in foreclosures is "inevitable", the wide availability of loan tolerance should keep many people at home.