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Study: 400,000 Homeowners Are ‘Needlessly Delinquent’

Published on 8 April 2021 at 18:58

Stressed mortgage home buyers

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 those who have actually elected the option
during the pandemic. This has ultimately led to an increase in the number of home buyers who
are delinquent on their mortgages currently. Researchers Laurie Goodman and Michael Neal
have reported that there are roughly 400,000 homeowners who are “needlessly delinquent."

Whether 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. Recent reports indícate this was 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 understand mortgage forbearance
options better, 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)

Written by: Ashley Juarez


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