More than 2.9 million mortgages are in forbearance – 5.5% of all mortgages in the US, according to a new report by Black Knight.
About 22 million Americans have filed for unemployment in the last four weeks, and the economic effects of the COVID-19 outbreak are hitting the mortgage industry, Black Knight said. Together, the 2.9 million mortgages currently in forbearance account for $651 billion in unpaid principal. They include 4.9% of all GSE-backed loans and 7.6% of all FHA/VA loans.
This could put a strain on mortgage servicers, who must make advance principal and interest payments on the loans they service each month, regardless of the loans’ forbearance status.
“At today’s level, mortgage servicers would need to advance $2.3billion/month to holders of government-backed mortgage securities on COVID-19-related forbearances,” Black Knight said. “Another $1.1 billion in lost funds will be faced each month by those with portfolio-held or privately securitized mortgages (nearly 5% of these loans are in forbearance as well).”
The CARES Act, which was passed to mitigate the economic impacts of the COVID-19 outbreak, mandates that servicers offer forbearance to borrowers impacted by the pandemic. However, the legislation did not put in place a liquidity backstop for those servicers.
“While Ginnie Mae has announced a pass-through assistance program through which it will advance principal and interest payments to investors on behalf of servicers, at present there is no such program in place for mortgages backed by the GSEs,” Black Knight said.
Both industry groups and lawmakers have called on regulators to provide liquidity to servicers to help them extend the mandated forbearance to borrowers.