CLEVELAND — At the end of the week, the mortgage payments for millions of Americans will come due and a growing number of them will seek relief amid the COVID-19 pandemic. As the state and national economy slowly begins to re-open, however, mortgage and lending experts hope the worst may be over.
Black Knight, Inc., a data and analytics firm that services the mortgage and real estate industries, said this week that the latest data shows the number of American mortgage holders seeking relief -- also known as mortgage forbearance -- had climbed to 3.8 million, accounting for more than 7% of all active mortgages.
Under the CARES Act passed by Congress in March, homeowners of government-backed mortgages can seek up to 6 months of relief. The relief can come in the form of a pause on payments or reduced payments. A moratorium on foreclosure actions is also in effect through mid-May. For homeowners whose mortgages are not backed by the federal government, there are also relief options available from their private lenders.
As was the case in early March and early April, experts expect another surge in forbearance requests in the early days of May. However, Ed Hensley, the president of the Ohio Mortgage Bankers Association, said the current read is that it appears to be slowing down after massive surges early on.
"From our standpoint as lenders, we're in uncharted water. We've never dealt with anything this fast," Hensley said. "We're seeing some light at the end of the tunnel, I believe, on people getting back to work."
In addition to the CARES Act, the Federal Reserve has also taken aggressive action to stem the economic impact of COVID-19, including slashing interest rates. Because the robust economy was doing well prior to the pandemic, economists believe a rebound could come much more quickly compared to the Great Recession.
"From the mortgage industry side, I think we've seen the federal reserve step up and really use whatever ammunition they have available to keep the rates low," said Daniel Shoag, an economics professor at Case Western Reserve University. "We don't have a lack of investment because of the cost of investment. People aren't buying houses because the interest rate is high. It's because of the coronavirus. We were in a very good place before with the unemployment rates very low, inflation pretty low. We were starting to see a little wage growth. It took a long time to get there."
Although the actions taken by the Federal Reserve and Congress should undoubtedly help, Hensley said the true driver of an economic rebound will simply be to get people working again. On Friday, the US Department of Labor reported the unemployment rate had increased to 14.7%, the largest and most drastic decline since the government began tracking data in 1939. However, some financial experts anticipated the unemployment rate to be far higher.
"Now as the economy starts to open back up and retail opens and the service industry opens, how many of these people get called back [to work]?" Hensley said. "How many of those workers get called back and how does it bring those numbers down? How quickly does it bring those numbers down? Is it going to bring it back down to where they were? Not overnight."
For homeowners who are concerned about making their May mortgage payment, Hensley said they should contact their lender as soon as possible. Under the program, mortgage forbearance does not negatively impact the homeowner's credit score.
"We're committed to making this as easy for the consumer as we possibly can," said Jay Pascoe, the executive director and COO of the OMBA. "We don't want the homes back. We want people to stay in their homes."
Hensley and Pascoe said even if homeowners are still able to make their monthly payments, it is a good time to review their mortgage product and interest rate. Additionally, with interest rates very low, refinancing may also be a worthwhile consideration.
