Under The Coronavirus Aid, Relief, and Economic Security Act, homeowners with federal mortgages have the option to defer their mortgage payments for six months. The only condition is that borrowers contact their lender and substantiate any information supporting their claim of a financial hardship resulting from the pandemic.
More borrowers are eligible for forbearance than than those who have actually elected the option during the pandemic. This has ultimately led to an increase in the number of homebuyers who are delinquent on their mortgages at this point in time. Researchers Laurie Goodman and Michael Neal have reported that there are roughly 400,000 homeowners who are “needlessly delinquent."
Whether or not these borrowers are aware of their eligibility status is unknown. Researchers have also taken into consideration the possible percentage of borrowers who have knowingly declined the option to go into forbearance due to misinformation governing repayment after the forbearance period ends.
As of Sept. 28, the Mortgage Bankers Association (MBA) stated that 6.87% of mortgage borrowers are in forbearance. Real estate professionals can assist in decreasing the number of delinquent borrowers by educating and helping them to better understand mortgage forbearance options, as well as the options they are eligible for. Servicers play an essential role in these outreach efforts. Credible sources offering helpful information include the National Association of Realtors, the Consumer Financial Protection Bureau and HUD. Information surrounding this topic can also be found on the CFPB website.
Goodman and Neal also have reported that roughly 2% of government borrowers are unnecessarily delinquent across a scope of varying servicer types, vintage years, and geographic locations. This data suggests that the outreach campaign to reach these borrowers should be broad. Furthermore, of the borrowers who are in forbearance, a quarter of them have continued to remain current on their payments. The idea is to use forbearance as a "safety net" or insurance policy in the event they are unable to make a payment.
Source: “A Broader Outreach Strategy Would Help 400,000 Needlessly Delinquent Mortgage Borrowers,” Urban Institute (Oct. 5, 2020)