As of August 25, 3.9 million homebuyers were in a mortgage prohibition program, according to Black Knight, a mortgage technology and analytics firm. It represents 7.4% of all active mortgages and is unchanged before the week. The numbers have not improved in the last two weeks.
More concerning is that people close to three quarters have extended their terms from the initial three-month period. This shows that their financial conditions are not improving, and they are still unable to make their monthly payments. Another survey by the Mortgage Bankers Association also clearly showed the rate of improvement.
“Extremely high rates of early claims for unemployment insurance and high levels of unemployment are a concern, and indicative of the challenges facing many households,” said Mike Fratentoni, MBA chief economist. “While new ban requests remain low, especially for Fannie Mae and Freddie Mac loans, the pace of exit from prohibition has declined for two straight weeks.”
Government bailouts do not require payment immediately after refusing borrowers; Instead, those payments can be made when the loan is either refinanced or the house is sold.
Mortgage bailout, under the CARES Act, allows borrowers to delay monthly payments on government-backed loans by up to one year. Banks and private-label securities have offered roughly six months, but it is unclear how long they will extend.
Breaking it down by loan type, the Fannie Mae and Freddie Mac sanctions decrease by 23,000 borrowers was almost entirely offset by a 10,000-borrower increase in FHA restrictions and a 12,000-increase between bank-held and private-label loans.
In the past 30 days, active sanctions have declined by 171,000, with the strongest improvement in Fannie Mae and Freddie Mac loans. More modest improvements have been seen between FHA / VA forbes and both bank and portfolio loans.
The major concern is that the expanded unemployment benefits have now expired, and some lenders were using those to make their monthly payments. Without additional assistance, experts say, mortgage bailout numbers may start running higher again.