Mortgage forbearance is when your lender allows you to temporarily pay your mortgage at a lower payment or pause paying your mortgage for a period of time. Of course, ultimately you will have to pay the payment reduction or the paused payments back at a later date. Due to the pandemic, mortgage forbearance has been a valid option for many Americans that have been negatively impacted financially. With this said, the length of these programs is still somewhat of a mystery.
According to the Mortgage Bankers Association, as of January 3, 2021, about 1 in 20 mortgage holders (5.5%) were in a forbearance program. While this is a significant number, there are many Americans that may have opted into forbearance just in case. Many of these borrowers in fact do not need any assistance, but were simply being cautious. Given the relatively simple application process, many homeowners decided to take part. In addition, the percentage of mortgages in forbearance is continuing to creep up. This is due to the fact that forbearance programs don’t require borrowers to show proof of hardship.
Although nobody knows exactly when the various relief programs will expire, U.S. Banks are bracing for losses in their residential mortgage portfolios. Interestingly, more than half the borrowers in forbearance have requested extensions since October 2020. Another interesting finding is that most of the increase in forbearance requests have come from customers with mortgages backed by Ginnie Mae. These mortgages tend to focus more on first-time and low income buyers. Typically, these borrowers tend to have more debt spread across various areas.
Ultimately, the conventional thinking is that we should see a higher prevalence of foreclosures in the lower priced market as compared to the luxury market. If you are looking for guidance with navigating the South Florida real estate market, we can help. Contact us today!