The owner of a dance school, Larvita McFarquhar, says she is shocked by the lack of help the stimulus bill will provide to small businesses and argues that strict policies from politicians are destroying lives in the U.S.
A promising sign of recovery in the economy devastated by the pandemic has stagnated: fewer borrowers are resuming mortgage payments.
The proportion of homeowners who postponed mortgage payments had been steadily falling from June to November, an indication that people were returning to work and the economy was starting to recover. But the decline has practically stabilized since November, when the current wave of coronavirus cases has increased in communities across the country.
In the past two months, that group of homeowners has fallen by about 5.5%, according to the Mortgage Bankers Association. Although this fell from a peak of 8.55% in June, some economists are concerned about the stagnation of the tolerance rate – and fear that it may even start to rise with the reduction of jobs in the economy.
Other data indicate a slowdown in the US economy this winter and greater pressure on household finances. Employers cut jobs last month for the first time since spring. The number of job openings has decreased and claims for unemployment insurance remain high. Retail sales fell for three consecutive months.
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“With the declining recovery and more unemployment claims, we are likely to see an increase in demand for indulgence,” said Ralph McLaughlin, chief economist at Haus, a home finance startup. “One of the safeguards that people have, if they own a home, is to ask for tolerance.”
The approximately 5.5% of borrowers in patience represent about 2.7 million owners, according to the MBA. (The rate dropped to 5.37% in early January.) At the peak of June, about 4.3 million homeowners were on tolerance plans, according to the MBA.
Shunda Lee planned to restart payments for her home in Forney, Texas, this month, after the end of a three-month indulgence from Regions Financial Corp. The courts where she works as a lawyer have often been closed, questioning her short-term income.
The pandemic closed Texas’s courts last spring, but Lee, 47, managed to stay up to September, leveraging his savings to help cover monthly payments of about $ 1,600 on his federally backed mortgage. She recently asked for – and received – a three-month extension to her regions’ tolerance plan.
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If she is not yet working full time when the extension expires, she said she plans to request additional tolerance. Lee said he would ask his parents, who live nearby, for help as a last resort.
“If the worst happens, I will do it,” she said. “Nobody wants me to lose my home.”
The federal Cares law, passed last March, gave borrowers the opportunity to delay payment of federally supported mortgages for up to 12 months. About 75% of U.S. mortgages are guaranteed or insured by the U.S. government, according to mortgage data company Black Knight Inc.
Many homeowners may not be able to start paying again when older plans begin to expire in late March, said Andy Walden, director of market research at Black Knight.
“This is a big question in terms of which portion of these owners … could get back on track and which portion would need additional assistance,” said Walden.
Only 35% of owners with tolerance plans that expired near the end of December were removed from tolerance in the first week of January, according to the Black Knight. This fell by an average of 60% in the previous three months. This means that more borrowers obtained extensions of their tolerance plans in January.
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Some of the borrowers who stepped out of tolerance no longer needed relief plans and others were able to work with long-term repayment options, such as a modified loan with a lower interest rate. Others, with recently expired tolerance plans, have already delayed their payments, according to the MBA. Of those borrowers, some probably needed an extension and simply forgot to ask for one – or didn’t know they needed to ask.
Homeowners on loans from the Federal Housing Administration are more likely to be forgiving than those on mortgages backed by Freddie Mac or Fannie Mae, according to MBA data. Only 3.13% of Fannie and Freddie’s mortgages were under tolerance in early January, compared to 7.67% of FHA loans.
FHA borrowers typically have weaker credit, lower yields and lower payments than Fannie and Freddie borrowers. Job losses during the pandemic disproportionately affected low-income workers, including employees in restaurants, hotels and shopping malls that were devastated by the home-based economy.
And people who feel they need to apply for a mortgage waiver in the near future may not be able to. The current deadline for signing with patience on many federally supported home loans is the end of February. On his first day in office, President Biden asked the Department of Housing and Urban Development and other agencies to extend the deadline until at least the end of March. (The United States Department of Agriculture has already agreed to do so.)
Dean Lemieux, 51, of Daphne, Alabama, signed a tolerance agreement with his creditor, Mr. Cooper Group Inc., in December.
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Lemieux, a project manager in the oil and gas industry, lost his six-figure revenue last spring when oil prices fell to their lowest level in years. He and his wife took out their savings to keep the mortgage on track during the fall.
“It was like we were on the Titanic,” said Lemieux. “Now we’re in the lifeboat with patience.”