Forbearance During the Pandemic: What Do We Know Thus Far?

Abstract

The pandemic has caused severe distress for households across the country. In response, policymakers and lenders have provided for the widespread use of forbearance, providing homeowners payment relief during this crisis. This article highlights the particular features of these forbearance plans and the rate of take-up over the initial period and then discusses the potential outcomes with respect to mortgage delinquency and foreclosure rates at the end of the forbearance period.

TOPICS: MBS and residential mortgage loans, risk management, legal/regulatory/public policy

Key Findings

• • The onset of the pandemic caused severe distress for millions of families who lost jobs or had reduced income.

• • At the peak, more than 4.3 million mortgages, 8.5% of all mortgages outstanding were placed in forbearance, with an even higher share of FHA and VA loans granted such relief.

• • Mortgage delinquencies have spiked. However, an improving job market and a strong housing market could be enough keep all of these delinquencies from becoming foreclosures if borrowers are able to exit from forbearance and resume making their payments.