Almost 4% of mortgage borrowers have stopped making their payments as the coronavirus pandemic has put millions of U.S. homeowners out of work.
The share of loans in forbearance jumped to 3.74% during the week ended April 5, up from 2.73% the previous week, according to a survey from the Mortgage Bankers Association.
Home loans backed by Ginnie Mae, which are issued to riskier borrowers, showed the largest weekly growth, with the share in forbearance climbing 1.58 percentage points to 5.89%. In contrast, loans backed by Fannie Mae and Freddie Mac increased to 2.44% from 1.69%.
Almost 17 million Americans have filed for unemployment benefits in the past three weeks, with the virus battering the economy. The government is requiring lenders handling payments on federally backed loans to give borrowers grace periods of as much as six months at a time with no penalties.
“The nationwide shutdown of the economy to slow the spread of COVID-19 continues to create hardships for millions of households, and more are contacting their servicers for relief,” Mike Fratantoni, MBA’s chief economist, said in a statement.
On Thursday, analysts from JPMorgan Chase & Co. wrote that the use of forbearance is likely to rise along with unemployment, and “many servicers would be unable to sustain six months of forbearance advancements on 10% to 20% of their book.”
Borrowers with relatively low credit scores, many of whom live paycheck to paycheck, are most likely to seek relief. Over the past two years, Ginnie Mae has guaranteed $583 billion of 30-year mortgages with FICO scores below 715, according to data compiled by Bloomberg.