- The number of people requesting a break from their mortgages has skyrocketed.
- Even in the improbable event that figure doesn’t rise any more, it’s a staggering amount of debt that’s on hold.
- Those who are using the mortgage forbearance program won’t have the capacity to pay off their missed payments.
Coronavirus has created the sharpest drop-off in employment rates the U.S. has ever seen. Those job losses are now translating into a shocking rate of unpaid mortgages that are about to come crashing down.
Under the federal government’s coronavirus relief package, homeowners can put off their mortgage payments for up to three months. Data from the Mortgage Bankers Association show that the number of people taking advantage of the program is growing at an alarming rate.
In just a month, the percentage of loans in forbearance went from 0.25% to 2.66%. The forbearance program is intended to help Americans make ends meet as COVID-19 puts the entire economy on pause. But some parts of the economy aren’t on pause—they’re on an indefinite vacation.
Unemployment Will Persist
That’s because even if coronavirus outbreaks are contained in the coming weeks, the public will likely carry on with social distancing measures. Ex-FDA commissioner Scott Gottlieb said the lasting fallout from coronavirus will cripple a wide range of industries from aviation to hospitality.
That means the layoffs that have ripped through the labor force aren’t temporary—those people will probably remain unemployed once lockdown measures have been lifted. The government’s forbearance program allows them to postpone their mortgage payments, but not indefinitely.
Lump Sums Create a Mortgage Debt Hangover
As banks across the country roll out their mortgage deferment schemes, it has become painfully clear that the government’s plan to ease the pain is simply a delay tactic. Instead of seeing a steady uptick in mortgage defaults over the next few months, mortgage servicers are…