Bankers Help Keep Borrowers in Homes During Pandemic

11/18/20

A new study from Freddie Mac found that banker forbearance efforts played a key role in keeping mortgage borrowers in their homes during the COVID-19 pandemic. “Without forbearance, many of these households would have been forced to sell their homes or would have defaulted on their mortgages, which, in turn, could have depressed the housing market, leading to further defaults in a vicious cycle,” the agency said.

COVID-19-related mortgage forbearances reached a peak in May 2020, with more than fourmillion mortgages in forbearance—representing about 8% of outstanding mortgages and $1 trillion in mortgage debt, Freddie Mac said, adding that through forbearance, homeowners have delayed about $4 billion in mortgage payments each month.

Loans with higher forbearance rates shared characteristics with those associated with higher default rates including a high loan-to-value ratio, low credit scores and high debt-to-income ratio, The rate of forbearance was lowest for loans with low monthly payments.