While more than a half of Americans expressed high confidence in their ability to pay their mortgage … [+]
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Nearly 65% of Americans felt confident about paying their mortgage obligations late last month. Friday’s flurry of economic news – from an unexpected job spike in May to a welcome drop in mortgage forbearance – seems to both buttress that assuredness but also, in some regards, undermine it.
In the latest installment of the U.S. Census Bureau’s weekly Household Pulse Survey, a new initiative the agency began in April, about 65% of respondents said they were highly confident in their ability to pay their home loans in June.
That tally is only slightly higher than the 61% who expressed high confidence about paying “next month’s mortgage” in the first questionnaire that collected data from April 23 – May 5.
Those most confident are borrowers between 40 – 54 years of age, who hold at least a bachelor’s degree, are married and earn between $100,000 – $150,000.
Surprisingly, however, that same cohort was also quite likely to tell the U.S. Census that they have deferred or will defer their mortgage payments. This aligns with a May survey conducted by online lending marketplace LendingTree TREE that found that the majority of homeowners who had requested forbearance could have met their monthly obligations without it.
Those borrowers “just wanted a break from their normal payments,” according to LendingTree.
Mortgage borrowers’ ability to pay their forborne monthly installments is waning
Nonetheless, even if many homeowners remain positive about their mortgage-paying power, some of the recent economic news appear to be clouding the immediate future.
Mortgage technology and date company Black Knight reported today that while the number of mortgages in forbearance dropped in the week of May 26 – June 2 for the first time since the onset of the coronavirus pandemic (8.9% mortgages are now in forbearance), remittances have also declined.
As of May 26, the firm found that only 22% of homeowners in forbearance had actually made May payments, compared to 46% in April.
“Far fewer homeowners in forbearance remitted May payments than did in April,” said Black Knight CEO Anthony Jabbour in a press statement. “If that trend holds true through the end of the month, the market should be prepared for another likely rise in the delinquency rate for May.”
Another somewhat troublesome statistic in Black Knight’s report is that while overall forbearance numbers fell, 9,000 new plans were initiated for mortgages held in bank portfolios and private-label securities.
As of June 2, 9.6% of portfolio and private home loans were in forbearance, only a slight percentage increase from May 19 but, as a share of total loans by type, some 2.5% more than the mortgages guaranteed by Freddie Mac and Fannie Mae.
While private loans often help expand homeownership and property development, they do not conform to the government’s standards and are, thus, riskier for banks and mortgage investors – especially amid the Covid-19 economic slump.
It is yet uncertain what the job market and government stimulus will mean for homeowners this summer
The U.S. economy added the staggering 2.5 million jobs in May, wildly beating the forecasts for another month of major losses. While this may signal an economic recovery as businesses start to reopen, a number of companies have just recently announced layoffs and the ongoing protests might slow down the rebound.
At the same time, CARES Act-mandated protections and financial aid are starting to soon expire, include the ban on evictions and foreclosures as well as the supplemental unemployment benefits.
“It remains to be seen how that will impact both forbearance requests and overall mortgage delinquencies,” said Jabbour.