In a bit of alarming news due to the financial fallout caused by the Coronavirus, one forecast has predicted that the number of mortgage delinquencies are going to be worse than the Great Recession. First reported on MarketWatch and citing studies by UK Economic Group Oxford Economics, the estimates are predicting that 15% of homeowners will fall behind on their mortgage payments. If that happens, this will exceed the highest delinquency rate of 10% during the Great Recession.
The Current Situation Homeowners Are In
With a number approaching four million homeowners who are currently in forbearance plans, and an economy nowhere near normalcy despite slowly opening back up in phases, the number looks like it will only increase.
With the President signing a Stimulus legislation allowing borrowers who have a federally-backed mortgage to ask for forbearance up to 12 months, which we talked about in this blog update, it means that many homeowners are able to skip payments entirely or make reduced payments for an agreed upon period of time,
When new loan applicants are surfacing, lenders are getting more strict on requirements for new loans as they taken on serious risk.
“The uncertainty in the mortgage market has contributed to a significant tightening of lending standards that may persist even once a recovery is underway,” Oxford Economics wrote.
While the speed of forbearance requests has slowed off the incredible April pace, call volume did pick up, which could be a signal that people's ability to pay their mortgage is starting to become less and less feasible. Also, the May due dates arrived and people may be calling for extensions, according to comments made by Mike Fratantoni, who holds the position of chief economist at the Mortgage Bankers Association.
Servicers are having a lot of of trouble keeping up with the number of requests for forbearance, but the great thing for our economy is that there will be a lesser amount of foreclosures coming up over the next few years. Allowing people to stay in their homes is always a good thing for our economy.
On the flip side, we are always ready to help people make money in any real estate market. Read how the volatile real estate market is creating opportunities for investors.
Stay tuned for more information on how you can stay ahead of the real estate game.