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Troubled Mortgages Continue to Soar in Latest MBA Survey, With Bad and Good Signs Emerging

May 06, 2020 by Marc Rapport

The number of American homeowners unable to keep up with their mortgages in a pandemic-stricken economy continued its relentless rise, according to the latest report from the Mortgage Bankers Association (MBA).

The MBA reported Monday, May 4, that 7.54% of the loans in mortgage servicers' portfolios were now in forbearance, a 7.9% jump from the previous week's 6.99%, itself 16.7% up from 5.99% the week before. That figure was 0.25% on March 2, meaning forbearances have risen 2,916% in two months.

And while the pace of growth has slowed, that doesn't mean the bottom has been reached. "With millions more Americans filing for unemployment over the week, the level of job market distress continues to worsen," MBA senior vice president and chief economist Mike Fratantoni said in the MBA's weekly update.

"That is why we expect that the share of loans in forbearance will continue to grow, particularly as new mortgage payments come due in May," he said.

Ginnie Mae loans cross 10% line

Based on survey data that covered from April 20 to 26 and represents almost 77% of the first mortgage servicing market, about 3.8 million homeowners are now in forbearance plans that allow them to delay payments, the MBA said.

Among investor-backed mortgage loans, Ginnie Mae had the highest share in forbearance at 10.45%, the MBA said. Fannie Mae and Freddie Mac loans in forbearance grew from 5.46% to 5.85% for the week.

Depository servicers, such as credit unions and banks holding loans in their own portfolios, were at 8.41%, and independent mortgage bank servicers had 7.13% of their loans in forbearance, the trade group said.

38.4 million mortgages, 30 million new jobless claims

There are about 38.4 million total loans in the servicing market. Just over 30 million Americans have filed first-time unemployment claims over the past several weeks, representing nearly 19% of the U.S. labor force.

The pace of growth for first-time claims has slowed, but joblessness is sky high. Reuters reported on Tuesday, May 5, that while White House Senior Economic Advisor Kevin Hassett said the April jobs report due out later this week could show an unemployment rate of 20%, economists with the Federal Reserve in Chicago are estimating the true rate to be between 25.1% to 34.6%, levels unseen since the Great Depression.

Reopening and new purchase apps provide some silver lining

States and cities are in various stages of allowing businesses and public facilities to reopen or operate with less restrictions had they already been open. The effects of those moves on the local economies and on the spread of the lethal virus are both open questions.

The MBA did see some possible positivity there. "As states across the country begin to reopen their economies, a silver lining we are seeing is indications of increased activity in the housing market, including more purchase applications in some markets," Fratantoni said.

"We are hopeful that the housing market can eventually contribute to a broader rebound in economic activity, which would then begin to reverse the unprecedented job losses experienced during this crisis," the MBA economist said.

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