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1M Delinquent Homeowners Haven’t Asked for Forbearance

Of those, 680K have loans backed by Fannie or Freddie and could easily defer payments for up to a year. Surveys suggest they’re likely confused about their options.

NEW YORK – Homeowners who have failed to take advantage of pandemic-related mortgage assistance may be at risk of losing their properties. A little more than a million owners nationwide are at least 30 days past due on their monthly payments and haven’t entered a forbearance program or engaged their lender about some other financial solution, according to an analysis from Black Knight, a mortgage data firm.

About 680,000 of those homeowners have federally guaranteed mortgages and are eligible for a forbearance program to put their monthly payments on hold for up to a year without penalty; they aren’t required to prove hardship under federal rules. (They would have to pay back the funds at a later date.) Many lenders also offer similar help to borrowers without a federally guaranteed mortgage.

But in both cases, however, borrowers must initiate outreach for the help.

Homeowners may not be contacting lenders because they’re confused, surveys show. More than half of borrowers surveyed by the National Housing Resource Center in July say they weren’t aware of forbearance programs or didn’t know how it works. Of consumers confused about their options, nearly 70% said they fear being required to make a large lump-sum payment at the end of their forbearance period – which isn’t true.

“Some borrowers are falling through the cracks that we’re not picking up,” Lisa Rice, president and CEO of the National Fair Housing Alliance, told The Wall Street Journal. “It’s just a really sad series of events.”

Housing groups warn that the number of homeowners with past-due mortgage payments could swell even more as people currently in forbearance reach the end of their program terms in October. Those homeowners must request an extension from their lender if they need more time.

“Borrowers who are eligible to be in forbearance will preserve their options to avoid foreclosure, versus those who became delinquent and have accumulated penalties and interest in a march toward foreclosure,” says Faith Schwartz, president of advisory firm Housing Finance Strategies.

Source: “A Million Mortgage Borrowers Fall Through Virus Safety Net,” The Wall Street Journal (Sept. 18, 2020) [Log-in required.]

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