Will Mortgage Delinquencies Exceed Great Recession Figures?
Though this economic downturn has a different origin than the Great Recession, homeowners may be feeling déjà vu as nearly 4 million of them face forbearance plans, according to the Mortgage Bankers Association. And a new report from Oxford Economics says the already bad situation may get worse as a projected 15 percent of homeowners may fall behind on mortgage payments. This figure would eclipse the Great Recession’s delinquency rate of 10 percent and would put massive strain on the already stressed lending industry.
The coronavirus-fueled economic downturn is hitting homeowners hard. And the worst may be yet to come.
A new report from U.K.-based economic forecasting firm Oxford Economics estimates that 15% of homeowners will fall behind on their monthly mortgage payments. If that forecast comes to fruition, mortgage delinquencies caused by the coronavirus pandemic would exceed the number seen during the Great Recession. Back then, the peak delinquency rate was 10%.
Nearly 4 million homeowners are in the midst of forbearance plans, representing 7.54% of all mortgages, according to the latest data from the Mortgage Bankers Association, an industry trade group. When it comes to loans backed by Ginnie Mae, that figure increases to nearly 11% — these include Federal Housing Administration and Veteran Affairs loans.
Stimulus legislation signed by President Donald Trump allows any borrower with a federally-backed mortgage to request forbearance for up to 12 months, meaning the homeowner can skip or make reduced payments during that time.