May 28, 2020 - Economy

Many Americans don't know about mortgage deferral plans

Dion Rabouin

Houses in the evening light — Photo: Richard Baker/In Pictures via Getty Images

The total number of home loans now in forbearance increased to 8.36%, according to the latest report from the Mortgage Bankers Association, and that number could be higher but many Americans aren't aware they have the option.

What it means: Fannie Mae's latest national housing survey finds that only half of mortgage holders and just a third of renters know about relief programs, including the forbearance program now available because of the CARES Act.

Details: The survey finds that just half of mortgage holders understand what forbearance is.

One in three don’t understand what a loan modification entails.
More than 60% of homeowners with a mortgage were unaware of any mortgage payment deferral offer from their lender.

Why it matters: The increase of borrowers in forbearance has slowed rapidly in recent weeks, but could pick up steam again once more borrowers learn about the programs.

That could provide an additional boost to the economy, but could also spell trouble for mortgage servicers and the mortgage-backed securities market.

The big picture: The current level of borrowers taking advantage of the forbearance program means that American consumers have $7.9 billion a month available to spend that otherwise might be going to a monthly mortgage payment, according to an analysis by Cowen Research Group.

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

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Many Americans don't know about mortgage deferral plans

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