May 5, 2020 - Economy & Business

Mortgage forbearance requests start to plateau amid coronavirus crisis

Data: Mortgage Bankers Association; Chart: Axios Visuals
Data: Mortgage Bankers Association; Chart: Axios Visuals

The number of U.S. mortgages in forbearance increased again in the last full week of April, but new requests slowed significantly from the pace earlier this year, data released Monday by the Mortgage Bankers Association showed.

Why it matters: A total of 3.8 million homeowners are now in forbearance plans, accounting for 7.54% of all mortgages, but that may actually be a good thing.

What's happening: Forbearance requests as a percentage of servicing portfolio volume fell for the third consecutive week, from 1.14% to 0.63%, and calls about forbearance accounted for the lowest percentage of total calls since the survey began in early March.

  • MBA said forbearance requests grew by 1,270% between the week of March 2 and the week of March 16, and another 1,896% between the week of March 16 and the week of March 30.

How it works: The decline in requests and approvals for forbearance suggests that homeowners are still largely able to pay their mortgages, Jaret Seiberg, a researcher at financial services company Cowen Inc., says in a recent note.

  • "We believe Washington is confident that mortgage servicers can handle the current level of forbearance. Absent a surge, we do not see the Federal Reserve establishing a facility to provide additional liquidity as it won't be needed."
  • And the current $6.3 billion in savings is available to "be spent elsewhere in the economy."

Between the lines: "Forbearance is not forgiveness, so homeowners know that they are going to have to pay this money some day," Tendayi Kapfidze, chief economist at LendingTree, tells Axios.

  • "Typically if you own a house you’re financially savvy enough to know that a foreclosure process can take years, so you know you have some protection."

Go deeper: Coronavirus is squeezing more people out of the housing market

Go deeper