Millions of Americans Skip Mortgage Payments during the COVID-19 Pandemic- Here’s Why
The impact of COVID-19 is affecting every industry, as you can imagine. In June 2020, over 4.3 million homeowners skipped their mortgage payments, which is over twice the total number in March and the highest since the 2009 housing crises. Due to this, the overall delinquency rate for June is around 8%. Many Americans are still calling their mortgage services to ask for relief from mortgage payments, due to shutter downs and lockdowns increasing unemployment all around the country.
Unsplash | People have been looking for creative solutions to their housing dilemmas
The delinquency rate includes borrowers who have asked to delay or defer the payments by entering into the forbearance program. This is done with the help of their loan servicer and is also applicable for homeowners who don’t have such protection. However, they still have to work with their lender to arrange a repayment plan, as all won’t simply be forgiven. Moreover, their credit reports must also show that they are delinquent.
Even with the protection, it is highly unlikely that everyone would be able to pay back what they owe. So, banks and housing experts are keeping a sharp eye on the numbers to keep track of how many people are falling behind, and the numbers are obviously not looking good. Reports show that the delinquencies are increasing consistently, over 50% higher than they were in March. Back then, 631,000 people were behind on their payments, which now look considerably small as compared to the current numbers.
Unsplash | There has been a sharp decline in mortgage payments all over the nation
Things are looking a bit better in June though, which is due to the reopening of the economy months after the enforced lockdowns. However, according to reports and trends, things are expected to be more difficult for first-time homeowners with weaker credit.
The problem is, this amounts to nearly 11% of all homeowners that have skipped payments. The outlook for homeowners will depend on their ability to get back up on their feet now, especially those who lost their jobs or property during the pandemic.
Unsplash | Things will hopefully get better after all industries start getting back to normal
The good news is that the large percentage of jobs lost was in the service sector, which is slowly resuming operations after months; hence, rehiring stages are all but set.
This is better news for the mortgage department and lenders because these jobs are low skilled, so it’s very unlikely that those who lost jobs in this sector are homeowners. With homeowners, earning higher than minimum wage or with multiple workers in a single household, have higher chances of clearing their payments sooner than later in the future.
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