Moment of truth: Some homeowners expect to struggle to pay mortgage when extra unemployment ends
Jessica Menton
USA TODAY
“This argument that people don’t want to go back to work because they’re making more money on unemployment is ludicrous,” Roganovic, 39, says. “We don’t have work to go back to and we won’t for a long time. Some businesses might not survive.
The expiration of enhanced benefits comes at a critical time for mortgage borrowers. Policymakers return to Washington this week to debate whether the extra $600 in weekly unemployment payments will be extended beyond July to help shore up jobless people’s finances as the economy contends with the fallout from the pandemic.
Democrats proposed an extension, either at the full or a reduced amount, but some Republicans argue the extra money has encouraged many Americans to remain jobless.
Roughly half of millennial and Gen X mortgage borrowers say either they or someone in their household are receiving unemployment benefits, and many are concerned about paying their mortgage once the extra weekly benefits end, according to a new report from LendingTree. Just about 17% of baby boomer borrowers fall into this group.
The data was provided exclusively to USA TODAY.
Across all age groups, 40% said they or someone in their household are receiving unemployment benefits due to the pandemic. About 45% of those receiving benefits, or those who say someone else in their household was, are at least somewhat concerned about paying their mortgage once the extra $600 in weekly benefits ends. Of that total, 37% are somewhat comfortable paying their mortgage, and 9% have no idea how they will do so.
Many homeowners have sought mortgage forbearance to temporarily postpone their monthly payments due to a historic wave of layoffs. About 53% of mortgage borrowers are experiencing household income loss due to the pandemic, LendingTree data shows. When broken down by age groups, 61% of millennials have lost household income, followed by 57% of Gen X and about 37% of baby boomers.
Since March, nearly one in five borrowers have missed a mortgage payment.
“Unemployment is widespread, which shows just how much financial pain has come from the coronavirus crisis,” says Tendayi Kapfidze, chief economist for LendingTree. “People are losing income, and unemployment isn’t completely covering lost income for many folks.”
Some homeowners are anxious and confused
Americans struggling to pay their mortgages because they've lost a job or income during the pandemic can put off that bill for up to a year because of provisions in the CARES Act. But while the measures should be creating a feeling of relief, many borrowers are anxious because of confusing messages from the government and banks.
Forbearance allows borrowers to pause or reduce their mortgage payments, but they still have to repay those missed payments in the future. Under the CARES Act, homeowners with loans who are struggling financially because of the pandemic can request a forbearance for up to 180 days, which may be extended for an additional period of up to another six months if borrowers are still under financial duress.
But this relief applies only to federally-backed mortgages. For those, like Roganovic, who have non-government-backed or private loans, the forbearance or deferment options are left up to a loan servicer’s discretion.
In April, Chase, who Roganovic says services her loan, initially offered her a 90-day deferment over the phone with no late fees or late credit reporting, but said she would have to pay all of those missed months in a lump sum once the three months were up, Roganovic says. Then the bank offered her an additional three months of deferment via auto text when her first 90 days ended, she says.
But once that six months is up in October, it’s not clear if she’ll owe the delayed payments all at once, if she’ll qualify for a loan modification or if the payments will be added to the end of the loan term, she says. The mother of two is concerned that she’ll have to pay six months worth of her monthly $2,300 mortgage payment in a lump sum.
“I was a little relieved to get six months of help, but I still have lingering fear because I don’t know what will happen once forbearance ends,” Roganovic says.
A Chase spokesperson told USA TODAY that borrowers won't be required to make a lump-sum payment. Chase has options available for customers on a case-by-case basis that could include a continuation of a payment suspension, a loan modification or the addition of suspended payments to the back end of a loan, they said.
After USA TODAY contacted Chase on Friday, the bank reached out to Roganovic, she says. A representative told her that after six-months of forbearance, she will have the option to defer all of the missed payments to the end of the loan, Roganovic says. If she needs more forbearance, the bank can extend it by one month at a time for up to 12 months total, she added.
Less than one-third of borrowers have successfully received forbearance
Following the economic turmoil caused by the pandemic, about 30% of mortgage borrowers have entered into a forbearance agreement, according to LendingTree. Another 12% are in the process of negotiating the terms of their assistance, while 2% of borrowers were denied help.
Beyond forbearance, the confusion mostly lies in what happens once a borrower's time is up.
Of those who received forbearance, the majority (53%) said their lender requires a lump sum payment at the end of the forbearance period. Most (81%) are prepared to make that lump sum payment, but 16% aren’t sure they’ll have enough money, and 4% have no idea how they’ll come up with the funds.
Anthony Adams received forbearance when the economy hit the skids. The pandemic crimped sales at his family’s bakery in Orlando, Florida, forcing him out of a job.
In May, Wells Fargo initially offered Adams 90 days of deferment on his mortgage, which is backed by the U.S. Department of Veterans Affairs. Like Roganovic, the 49-year-old was surprised when Wells Fargo initially told him he’d still owe three months worth of payments – plus the current month – once that forbearance period was up. Then he opted into another three months of deferment, which ends in October.
Adams is worried about what will happen once forbearance concludes because Wells Fargo hasn’t provided him with answers. He wasn’t eligible for unemployment, he says. He was diagnosed in the spring with a terminal medical condition and is seeking permanent disability for his medical issue.
“It’s frustrating,” Adams says, who declined to say what his payments are. “It helps right now, but it doesn’t solve the ultimate issue. We’re really at the mercy of the banks.”
A lump-sum repayment won't be required for borrowers, a Wells Fargo spokesperson told USA TODAY. In general, it’s best for a customer who can resume making payments to do so as soon as possible, but with any government-backed loan, including a VA loan, customers who can’t make their payments due to COVID-19 are eligible for up to a total of a year of forbearance, the spokesperson said.
Contact your servicer
For those still experiencing financial hardship because of the pandemic, call the servicer immediately and ask them what forbearance or other relief options are available.
“Reach out to your lender right away if your situation is no better than it was a few months ago. There are options available,” says Greg McBride, chief financial analyst at Bankrate.com. “If you’re back to work but making less money, they could offer you a loan modification.”
The Federal Housing Finance Agency, which dictates guidelines for Fannie Mae and Freddie Mac-backed loans, said borrowers with federally backed mortgages who obtain a forbearance due to the crisis aren’t required to make a balloon payment when relief ends.
As more states pause or roll back their reopening plans following a spike in virus cases, further business closures could threaten the trajectory of improvements in the labor market and the economic rebound.
Just over two-thirds of mortgage borrowers facing income loss would consider defaulting on a debt payment to make ends meet, LendingTree data shows. Mortgage (24%) and credit cards (23%) were the top two bills respondents said they’d be most likely to default on first, followed by student loans (15%) and auto loans (5%).
Home-mortgage delinquencies jumped in May to the highest level since November 2011, according to a recent report from Black Knight, a mortgage technology and data provider. The number of borrowers more than 30 days late climbed to 4.3 million in May, up 723,000 from the prior month. More than 8% of all U.S. mortgages were either past due or in foreclosure, the report showed.
“If we end up losing forbearance options before the economy recovers, we will likely see a spike in mortgage delinquencies,” Kapfidze says. “The health crisis could then turn into a financial crisis, which would deteriorate the economic recovery.”
Jessica Menton
USA TODAY
“This argument that people don’t want to go back to work because they’re making more money on unemployment is ludicrous,” Roganovic, 39, says. “We don’t have work to go back to and we won’t for a long time. Some businesses might not survive.
The expiration of enhanced benefits comes at a critical time for mortgage borrowers. Policymakers return to Washington this week to debate whether the extra $600 in weekly unemployment payments will be extended beyond July to help shore up jobless people’s finances as the economy contends with the fallout from the pandemic.
Democrats proposed an extension, either at the full or a reduced amount, but some Republicans argue the extra money has encouraged many Americans to remain jobless.
Roughly half of millennial and Gen X mortgage borrowers say either they or someone in their household are receiving unemployment benefits, and many are concerned about paying their mortgage once the extra weekly benefits end, according to a new report from LendingTree. Just about 17% of baby boomer borrowers fall into this group.
The data was provided exclusively to USA TODAY.
Across all age groups, 40% said they or someone in their household are receiving unemployment benefits due to the pandemic. About 45% of those receiving benefits, or those who say someone else in their household was, are at least somewhat concerned about paying their mortgage once the extra $600 in weekly benefits ends. Of that total, 37% are somewhat comfortable paying their mortgage, and 9% have no idea how they will do so.
Many homeowners have sought mortgage forbearance to temporarily postpone their monthly payments due to a historic wave of layoffs. About 53% of mortgage borrowers are experiencing household income loss due to the pandemic, LendingTree data shows. When broken down by age groups, 61% of millennials have lost household income, followed by 57% of Gen X and about 37% of baby boomers.
Since March, nearly one in five borrowers have missed a mortgage payment.
“Unemployment is widespread, which shows just how much financial pain has come from the coronavirus crisis,” says Tendayi Kapfidze, chief economist for LendingTree. “People are losing income, and unemployment isn’t completely covering lost income for many folks.”
Some homeowners are anxious and confused
Americans struggling to pay their mortgages because they've lost a job or income during the pandemic can put off that bill for up to a year because of provisions in the CARES Act. But while the measures should be creating a feeling of relief, many borrowers are anxious because of confusing messages from the government and banks.
Forbearance allows borrowers to pause or reduce their mortgage payments, but they still have to repay those missed payments in the future. Under the CARES Act, homeowners with loans who are struggling financially because of the pandemic can request a forbearance for up to 180 days, which may be extended for an additional period of up to another six months if borrowers are still under financial duress.
But this relief applies only to federally-backed mortgages. For those, like Roganovic, who have non-government-backed or private loans, the forbearance or deferment options are left up to a loan servicer’s discretion.
In April, Chase, who Roganovic says services her loan, initially offered her a 90-day deferment over the phone with no late fees or late credit reporting, but said she would have to pay all of those missed months in a lump sum once the three months were up, Roganovic says. Then the bank offered her an additional three months of deferment via auto text when her first 90 days ended, she says.
But once that six months is up in October, it’s not clear if she’ll owe the delayed payments all at once, if she’ll qualify for a loan modification or if the payments will be added to the end of the loan term, she says. The mother of two is concerned that she’ll have to pay six months worth of her monthly $2,300 mortgage payment in a lump sum.
“I was a little relieved to get six months of help, but I still have lingering fear because I don’t know what will happen once forbearance ends,” Roganovic says.
A Chase spokesperson told USA TODAY that borrowers won't be required to make a lump-sum payment. Chase has options available for customers on a case-by-case basis that could include a continuation of a payment suspension, a loan modification or the addition of suspended payments to the back end of a loan, they said.
After USA TODAY contacted Chase on Friday, the bank reached out to Roganovic, she says. A representative told her that after six-months of forbearance, she will have the option to defer all of the missed payments to the end of the loan, Roganovic says. If she needs more forbearance, the bank can extend it by one month at a time for up to 12 months total, she added.
Less than one-third of borrowers have successfully received forbearance
Following the economic turmoil caused by the pandemic, about 30% of mortgage borrowers have entered into a forbearance agreement, according to LendingTree. Another 12% are in the process of negotiating the terms of their assistance, while 2% of borrowers were denied help.
Beyond forbearance, the confusion mostly lies in what happens once a borrower's time is up.
Of those who received forbearance, the majority (53%) said their lender requires a lump sum payment at the end of the forbearance period. Most (81%) are prepared to make that lump sum payment, but 16% aren’t sure they’ll have enough money, and 4% have no idea how they’ll come up with the funds.
Anthony Adams received forbearance when the economy hit the skids. The pandemic crimped sales at his family’s bakery in Orlando, Florida, forcing him out of a job.
In May, Wells Fargo initially offered Adams 90 days of deferment on his mortgage, which is backed by the U.S. Department of Veterans Affairs. Like Roganovic, the 49-year-old was surprised when Wells Fargo initially told him he’d still owe three months worth of payments – plus the current month – once that forbearance period was up. Then he opted into another three months of deferment, which ends in October.
Adams is worried about what will happen once forbearance concludes because Wells Fargo hasn’t provided him with answers. He wasn’t eligible for unemployment, he says. He was diagnosed in the spring with a terminal medical condition and is seeking permanent disability for his medical issue.
“It’s frustrating,” Adams says, who declined to say what his payments are. “It helps right now, but it doesn’t solve the ultimate issue. We’re really at the mercy of the banks.”
A lump-sum repayment won't be required for borrowers, a Wells Fargo spokesperson told USA TODAY. In general, it’s best for a customer who can resume making payments to do so as soon as possible, but with any government-backed loan, including a VA loan, customers who can’t make their payments due to COVID-19 are eligible for up to a total of a year of forbearance, the spokesperson said.
Contact your servicer
For those still experiencing financial hardship because of the pandemic, call the servicer immediately and ask them what forbearance or other relief options are available.
“Reach out to your lender right away if your situation is no better than it was a few months ago. There are options available,” says Greg McBride, chief financial analyst at Bankrate.com. “If you’re back to work but making less money, they could offer you a loan modification.”
The Federal Housing Finance Agency, which dictates guidelines for Fannie Mae and Freddie Mac-backed loans, said borrowers with federally backed mortgages who obtain a forbearance due to the crisis aren’t required to make a balloon payment when relief ends.
As more states pause or roll back their reopening plans following a spike in virus cases, further business closures could threaten the trajectory of improvements in the labor market and the economic rebound.
Just over two-thirds of mortgage borrowers facing income loss would consider defaulting on a debt payment to make ends meet, LendingTree data shows. Mortgage (24%) and credit cards (23%) were the top two bills respondents said they’d be most likely to default on first, followed by student loans (15%) and auto loans (5%).
Home-mortgage delinquencies jumped in May to the highest level since November 2011, according to a recent report from Black Knight, a mortgage technology and data provider. The number of borrowers more than 30 days late climbed to 4.3 million in May, up 723,000 from the prior month. More than 8% of all U.S. mortgages were either past due or in foreclosure, the report showed.
“If we end up losing forbearance options before the economy recovers, we will likely see a spike in mortgage delinquencies,” Kapfidze says. “The health crisis could then turn into a financial crisis, which would deteriorate the economic recovery.”
