With forbearance, borrowers hit pause on their monthly loan payments.
The Department of Housing and Urban Development recently announced that the Federal Housing Administration is granting a two-month extension of its foreclosure and eviction moratorium and initial forbearance requests through February 28, 2021.
The moratorium is for single-family home borrowers with FHA-insured mortgages to request an initial Covid-19 forbearance from their mortgage servicer to defer or reduce their mortgage payments for up to six months. This can be extended for an additional six months. Borrowers needing assistance must contact their servicers by the end of February.
HUD Secretary Ben Carson said the foreclosure moratorium and forbearance extensions ensure homeowners will continue to have the critical relief and support they need to regain financial stability.
“FHA will continue to assist borrowers who are struggling to regain their financial footing as a result of this pandemic,” added Dana Wade, assistant secretary for housing and federal housing commissioner. “American homeowners should not be forced from their homes while they are seeking help.”
This marks the fourth extension of FHA’s eviction and foreclosure moratorium. The moratorium prohibits servicers from initiating or proceeding with foreclosure and foreclosure-related eviction actions for FHA-insured mortgages.
FHA requires mortgage servicers to provide up to six months of Covid-19 forbearance when a borrower requests this assistance and up to an additional six months of forbearance for borrowers who request an extension of the initial forbearance.
The Mortgage Bankers Association’s (MBA) latest forbearance and call volume survey revealed that the total number of loans now in forbearance increased slightly from 5.48% of servicers’ portfolio volume in the prior week to 5.49% as of December 13. According to MBA’s estimate, 2.7 million homeowners are in forbearance plans.
“The share of loans in forbearance has stayed fairly level since early November, often with small decreases in the GSE loan share and increases for Ginnie Mae loans,” said Mike Fratantoni, MBA’s senior vice president and chief economist. “That was the case last week. Additionally, forbearance requests from Ginnie Mae borrowers reached the highest level since the week ending June 14. Additional restrictions on businesses and rising Covid-19 cases are causing a renewed increase in layoffs and other signs of slowing economic activity. These troubling trends will likely result in more homeowners seeking relief.”
Black homeowners have struggled more than white homeowners to make mortgage and rent payments during the pandemic, according to Daryl Fairweather, chief economist of Redfin. She released a report in September on the Black-white homeownership gap, which noted that investors may see the coronavirus-spurred economic recession as an opportunity to buy up affordable homes and apartments and renovate them to appeal to wealthier buyers and renters, further reducing the number of affordable homes available to Black people.
“This pandemic-driven recession is already disproportionately hurting Black American employment with the Black-white jobless gap widening,” said Fairweather. “After the 2008 recession, the Black-white homeownership gap widened by 5%. And after the pandemic ends, the Black-white homeownership gap may worsen even more than it did following the 2008 recession.”
Marcia Griffin, founder of HomeFree-USA, a HUD-approved homeownership development organization, said immediate action is needed to ensure Black homeowners do not lose their homes.
“We work with several mortgage lenders who are telling us they have tens of thousands of Black borrowers who are not responding to requests for forbearance,” she said. “Homeowners must call their lenders by the end of December to request the final extension or they will default on their loans. There needs to be more done on the lender’s side and the borrower’s side in order to prevent a widening of the Black-white homeownership gap that already exists.”
Griffin said calls come in daily to HomeFree-USA from homeowners who are “exhausted, paralyzed by fear, COVID-sick and have lost their jobs. Everyone is concerned that they will lose their homes, but they are not working with their lenders for various reasons.”
She noted that there is a general sense of distrust among people of color about lenders and servicers and recommended that lenders work with a trusted organization to help them conduct outreach to these borrowers.
Likewise, Griffin said, “African American borrowers have to be proactive and contact their lenders directly or a counseling organization if they are not comfortable working with their lenders.”
The pandemic-driven recession is disproportionately hurting Black employment with the Black-white jobless gap widening, according to Redfin. After the 2008 recession, the Black-white homeownership gap widened by 5%. And after the pandemic ends, Redfin expects the Black-white homeownership gap to worsen even more than it did following the 2008 recession.