The impacts of the 2020 recession continue to ripple through the economy, with the brunt of job losses disproportionately hitting people of color. However, the share of homeowners taking advantage of federal forbearance programs moves aid in the opposite direction of where it’s needed most.
The federal foreclosure moratorium will keep delinquent homeowners out of the foreclosure process through June 30, 2021. Further, homeowners who are unable to make mortgage payments may enroll in a mortgage forbearance program. Homeowners in forbearance come to an agreement with their mortgage servicer, in which the servicer agrees to temporarily forgo an exercise of their rights to pursue foreclosure while the homeowner takes steps to bring the mortgage current.
Therefore, when the foreclosure moratorium expires, homeowners in forbearance will remain protected from foreclosure while they remain in good standing in their forbearance program.
Of the 2.7 million U.S. homeowners currently in forbearance programs as of the fourth quarter (Q4) of 2020, 2.1 million are delinquent on their payments. The remaining 600,000 are making payments, according to the Mortgage Bankers Association (MBA).
However, 1.1 million homeowners are delinquent on their mortgages and not enrolled in a forbearance program. These homeowners may be headed for foreclosure immediately upon expiration of the foreclosure moratorium.
Unequal protection from foreclosure
A recent report by the Urban Institute demonstrated the unequal enrollment in forbearance programs during the ongoing recession. The share of mortgaged homeowners delinquent and unprotected by a current forbearance program was:
- 0.9% in predominantly Asian neighborhoods;
- 1.2% in predominantly White neighborhoods;
- 1.6% in predominantly Latinx neighborhoods; and
- 2.3% in predominantly Black neighborhoods.
These unprotected and delinquent homeowners will enter the foreclosure process upon expiration of the foreclosure moratorium. This may be completely avoided by simply enrolling in a forbearance program.
Why haven’t roughly 1.1 million delinquent individuals enrolled in a forbearance program yet?
Some may be so far behind on their payments they see no option to climb out of delinquency and believe it’s useless to apply and attempt to catch up on payments. However, mortgages covered by Fannie Mae and Freddie Mac (the majority of U.S. mortgages) may take advantage of their loss mitigation waterfall, which allows homeowners to push missed payments accumulated during forbearance through the life of the loan, avoiding a lump payment due at the end of forbearance that most homeowners would be unable to pay.
Or, they may simply be unaware of their option to apply for forbearance.
It’s not too late to let your clients know about forbearance programs, and it’s not too late for them to take advantage of their forbearance options and keep their home. Information for how your clients can apply for a forbearance program can be found at the Consumer Financial Protection Bureau (CFPB).
The enrollment window for mortgage forbearance programs was recently extended through June 30, 2021 and an additional six months of forbearance is provided to homeowners enrolled in a forbearance program before June 30, 2021.
I don’t think there is anything to take advantage of. Lenders and the loan servicing companies want any forbearance paid current. There’s no advantage that I can see for those seeking to buy or refinance.
Ok…I just gotta say it. Your article would have just as much impact without the obligatoire endangered peoples of color statement. It’s either about one or the other and stating the plight of a race and then not making the entire article about that plight is pretentious and as wide spread as the corona virus. I see it everywhere! Maybe other people who aren’t black need to see it and it is enough to point it out to a majority of the population in an aside…but it’s just so weird that that is acceptable. It’s grammatically so erroneous to bring up a racial class as a major part of the story and then just drop it. But that’s just the way it goes right now in America perhaps it is an obligation to point every issue to the fact that Black folks in America live under a unique set of circumstances that require comment right now in every conversation taking place. Either way and all the way around oppression is as oppression does. I’m feeling it.