Mortgage abstentions drop 22% from May peak
There are 3.7 million American homeowners with mortgages in abstention this week, down 22% from May’s peak of 4.7 million, Black Knight said in a report Friday.
The total weekly drop was 66,000 loans, a slower pace than the 150,000 drop the week before, according to the report. Measured as a percentage of all mortgages, 7% of mortgage loans are in abstention, up from 7.1% the week before, Black Knight said.
The forbearance rate for mortgage loans backed by Fannie mae and Freddie mac, known as government-sponsored businesses, is 5% this week, up from 5.1% last week, according to the report.
The mortgage rate in Ginnie mae securities, mainly mortgages backed by Federal Housing Administration or the Veterans Administration, is 11.3%, against 11.5%. The forbearance share for mortgages held in bank portfolios or in private label bonds is 7.4%, compared to 7.5%.
“We’re seeing a bifurcation in the numbers, with GSE abstentions lower than the Ginnie space and private label space rates,” said Walt Schmidt, FTN Financialresponsible for mortgage strategy.
The total number of forborne mortgages declined as the labor market grew, Schmidt said.
the the unemployment rate in August was 8.4%, the lowest level since March. In April, the rate reached 14.7%, the highest in a Labor Department data series dating back to 1948.
While the economy has created 10.6 million jobs since April, it is not even halfway to replacing the 22.2 million jobs lost between February and March, according to government data.
Most economists predict that the weakness in the labor market will persist until 2021. Fannie Mae Chief Economist Doug Duncan predicts the unemployment rate will average 8.8% in 2020, and 7.1% next year.
The CARES law adopted by Congress in late March gave mortgage borrowers the option to suspend their monthly payments for up to 12 months due to the pandemic. Borrowers need only certify to their real estate agent that they have suffered a financial loss due to the health crisis.
