Approximately one million homeowners are at risk of losing their homes through foreclosure despite the safety net established by Congress at the start of the COVID-19 pandemic, according to industry data.
The Wall Street Journal reported that while homeowners with federally guaranteed mortgages were granted a reprieve from making home loan payments for up to a year without penalty in March, they were required to contact their lenders to request the relief. Instead of being proactive, many borrowers have instead fallen behind on payments, amassing late fees and missed payments.
“Some borrowers are falling through the cracks that we’re not picking up,” Lisa Rice, CEO of the National Fair Housing Alliance, a Washington, D.C.-based nonprofit that aims to end housing discrimination, told the WSJ. “It’s just a really sad series of events.”
One million borrowers are 30 days past due or more on their mortgages, but are not enrolled in a forbearance program, according to Black Knight Financial Services, a Florida-based provider of data and analytics serving the mortgage and real estate industries.
Of that number, 680,000 have federally guaranteed mortgages and qualify for forbearance under the CARES Act, which was enacted by lawmakers in March. Under the measure, home loan holders are required to pay back the balances in arrears. The rest have loans without a federal guarantee.
“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,” Faith Schwartz, president of Housing Finance Strategies, a Washington, D.C. advisory firm, told the newspaper.
A six-month extension is possible, but homeowners must request it. Lenders told the WSJ they are contacting borrowers before their forbearance periods expire.
Of the six million borrowers who were in forbearance at some point since the pandemic began, about 250,000 are again delinquent on their homes, the Black Knight data revealed.
A National Housing Resource Center survey revealed that nearly 57 percent of respondents were unaware of the forbearance program. Another 70 percent said they feared being required to make a large lump-sum payment at the end of the forbearance period.
“Servicers are absolutely reaching out to borrowers who are delinquent and not already in forbearance,” Pete Mills, a senior vice president at the Mortgage Bankers Association, told the newspaper. “For borrowers who haven’t called or are avoiding talking to their servicer, it’s important that they connect with them in order to understand their forbearance options.”