Key Highlights
- If shelter-in-place plan to buy time with CARES Act relief aid works, lenders may skirt worse crisis: mass foreclosures and market chaos
- According to Moody’s Analytics, some 15M households could stop paying mortgages if economy closed through summer or beyond
“This is an unprecedented event,” said Susan Wachter, professor of real estate and finance at the Wharton School of the University of Pennsylvania. Borrowers who’ve lost income due to the coronavirus pandemic, already a record 16.8M+ new jobless claims, can skip home payments on federally backed mortgages for up to 180 days but eventually, they’ll have to make up those payments.
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And if the economy remains closed due to the pandemic into the summer and beyond, Mark Zandi, chief economist with Moody’s Analytics, forecasts that approximately 30% of Americans with home loans, or 15M households, could stop paying those payments.
The longer the pandemic, the longer the economic fallout; the longer the economic fallout, the more expensive to “stave off” foreclosures.
Bank of America has already allowed 50,000 mortgage customers forbearance. Some of those loans aren’t federally backed and therefore not covered by the governments programs. Wells Fargo has already suspended jumbo loans as this bank predicts forbearance demand will deplete its liquidity sources. QuickenLoans, a nonbank that serves 1.8M borrowers, many of them federally backed loans, indicates its balance sheet is strong enough to serve its borrowers while paying mortgage-backed securities investors but Jay Farmer, Quickens CEO, said, “If a large percentage of the servicing book – let’s say 20%, 30% of clients you take care of – don’t have the ability to make a payment for six months, most servicers will not have the capital needed to cover those payments.”
In seemingly moments, all of these lenders, banks and nonbanks alike, have revamped their spring selling season predictions from one of the biggest in home sales and mortgage refinances to one of the biggest wave of delinquencies in history.
Thanks to Bloomberg and the National Mortgage News.
Also read: Mortgage Payments Can Be Delayed Up to One Year, How Old is Too Old for a 30-Year Mortgage?, Podcast: Your Top 8 Questions Answered | Housing, Economic Crash..Now What?
