mortgage payments

Nearly 3 Million Borrowers Have Been Granted Mortgage Relief

The 2.9 million loans in forbearance as of Thursday account for $651 billion in unpaid principal

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More than 2.9 million homeowners have taken advantage of a program designed to provide relief to holders of government-backed mortgages, part of the coronavirus CARES Act relief package.

This represents 5.5% of all active mortgages, according to Black Knight, a mortgage data and analytics company that is now tracking the growing numbers daily. 

The program allows borrowers to delay their monthly payments for a year. Those payments are then tacked on to the end of the loan, or paid back over time in a mortgage modification. Borrowers must tell their mortgage servicers that they have had financial hardship due to the coronavirus pandemic, but they do not have to provide any proof.

The 2.9 million loans in forbearance as of Thursday account for $651 billion in unpaid principal and include 4.9% of all government-sponsored enterprise loans (Fannie Mae and Freddie Mac) and 7.6% of all FHA/VA loans.

“In these times, it is essential to both our industry and for the benefit of the entire U.S. economy to have a clear understanding of the magnitude of the mortgage forbearance situation,” said Black Knight CEO Anthony Jabbour. 

Even if borrowers don’t make their monthly payments, those who collect the payments still have to advance the principal and interest amounts each month to bondholders. At the current level of forbearance, mortgage servicers would need to advance $2.3 billion per month to holders of government-backed mortgage securities on Covid-19-related forbearances. Another $1.1 billion in funds will be lost each month by those with portfolio-held or privately securitized mortgages (nearly 5% of these loans are in forbearance, as well).

While Ginnie Mae, which backs FHA/VA loans, has set up a relief fund to help its servicers, there is nothing currently available for Fannie Mae and Freddie Mac. FHFA Director Mark Calabria, the regulator of the two, has held steadfast against setting a relief fund up, claiming it is not necessary.

The entire mortgage industry has been fighting that hard, sending letters to the Treasury Department and the Federal Reserve, which would have to set up such a facility.

“It’s frankly frustrating and ridiculous that we do not have a solution in place,” said Jay Bray, CEO of Mr. Cooper, the nation’s largest mortgage servicer, who consulted with the Trump administration to set up the bailout. “When we were working on the Act, we had liquidity in it, and it did not make it into the Act. We were told it would be handled through the administration, and it’s a real problem.”

Last week, a bipartisan group of lawmakers sent a letter to Treasury Secretary Steven Mnuchin asking for a bailout fund. Late this week, Democrats Sherrod Brown, the ranking member of the Senate Banking Committee, and Maxine Waters, chairwoman of the House Financial Services Committee, sent another plea to Mnuchin and Federal Reserve Chairman Jerome Powell, saying:

“The government must be prepared to respond quickly to prevent a liquidity shortfall in the single-family and multifamily mortgage markets, and to ensure that consumers are equitably served by that response. Any liquidity provided must be used to stabilize the market at a time when many families may fall behind on payments and facilitate relief to individual homeowners and renters throughout the market through forbearance, loss mitigation, and protection from displacement, rather than immediate defaults and evictions.”

Calabria and Mnuchin did not respond to requests from CNBC for comment.

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