US Mortgage Delinquency Rates Surge... Mortgage Servicing Companies Cornered

[Image source=Yonhap News]

[Asia Economy Reporter Kwon Jae-hee] About 2 million homeowners in the United States have fallen behind on their monthly mortgage payments. As the number of unemployed Americans due to the COVID-19 pandemic increases, this figure is expected to rise further, according to a report by The Wall Street Journal (WSJ) on the 23rd (local time).

According to the Mortgage Bankers Association (MBA) of the United States, as of April 5, 3.74% of all mortgages were in forbearance. This is an increase from the previous week's forbearance rate of 2.73%.

Mike Fratantoni, MBA's Chief Economist, said, "The number of borrowers requesting forbearance will steadily increase at a rapid pace."

Companies such as Quicken Loans and Friedman Mortgage are representative secondary financial institutions, acting as intermediaries between borrowers who repay monthly and investors who receive monthly payments. Their own survey found that about 27 million mortgages, slightly more than half of first-lien mortgages, are for home purchases.

The $2 trillion stimulus package passed by the U.S. Congress last month allows homeowners struggling due to the COVID-19-induced economic downturn to apply for mortgage forbearance for up to 12 months without delinquency fees.

Given this situation, mortgage servicing companies are facing difficulties. Homeowners are deferring payments, but these companies still have to pay investors. The problem is that these companies handle 60% of U.S. mortgages.

Mortgage association members and other mortgage companies are pressuring the U.S. Federal Reserve (Fed) to support mortgage servicing companies through relief measures, similar to other industries hit hard by COVID-19.

Fed Chair Jerome Powell mentioned on the 9th (local time), "Mortgage companies play a key role in supporting households and consumer spending, which account for 70% of the economy."

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