The share of mortgage loans in forbearance decreased for the fifth week in a row, according to data from Mortgage Bankers Association. (MBA)
- Total number of loans now in forbearance decreased by 6 basis points to 4.90%
- By stage, 13.7% of total loans in forbearance are in the initial forbearance plan stage, while 84.1% are in a forbearance extension.
Even as the total number of loans in forbearance decreases, there is still a concern about a foreclosure wave especially with 2.5 million loans potentially facing foreclosure. However, rules proposed Monday by the Consumer Financial Protection Bureau would extend the foreclosure moratorium until the end of the year (CFPB)
- For Borrowers: The proposed rule would provide a special pre-foreclosure review period that would generally prohibit servicers from starting foreclosure until after December 31, 2021. This will make sure borrowers aren’t rushed into foreclosure when a potentially unprecedented number of borrowers exit forbearance at around the same time
- For Servicers: The proposed rule would permit servicers to offer certain streamlined loan modification options to borrowers with COVID-19-related hardships which would allow servicers to get borrowers into an affordable mortgage payment faster, with less paperwork for both the servicer and the borrower. However, any modification can not increase a borrower’s monthly payment and that extend the loan’s term by no more than 40 years from the modification’s effective date.
The Wall Street Journal this weekend reported on the tightening of mortgage standards across the country, “The tight lending environment illustrates a growing cleavage in the mortgage market: More home loans are being made than almost ever before, but they are going almost exclusively to borrowers with pristine credit histories and sizable down payments.” The reality is, the longer these forbearance plans exist the less likely mortgage companies are going to be to extend credit to less than stellar borrowers.
REMINDER: Despite the ban, evictions have not dropped to zero. The Eviction Lab at Princeton University says that since the pandemic began, 284,490 evictions have been filed across the five states and 28 cities. NBC News reports that some judges disagree with the federal order and are therefore ignoring it. In other cases, landlords are taking advantage of loopholes that still allow some foreclosures to move forward.