Roughly 5 million households did not make their rent or mortgage payments in December, and 3.5 million renters and homeowners feel at risk of losing their home, according to new research from the Mortgage Bankers Association.
There are some bright spots, however. The 5 million households who missed a payment in December was down from the 6 million households in September.
And overall, the $14.2 billion in missed mortgage payments in the fourth quarter of 2020 was down from the $19.4 billion in the third quarter of 2020, according to the MBA.
Younger Americans are disproportionately feeling the pain, the data suggests. Forty-three percent of student debt borrowers missed their Q4 2020 payments, up from a Q3 2020 report of 40%.
The slowly improving numbers could be attributed to the rollout of a second stimulus bill in December that included $25 billion in dedicated rental assistance, $600 in direct stimulus checks, $300 per week in enhanced unemployment benefits through March and an extension of the CDC eviction moratorium to January 31.
HousingWire recently spoke with CoreLogic’s Chief Appraiser Shawn Telford about re-examining traditional appraisal workflows in light of the changes brought on by COVID-19.
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But the next few months will be just as crucial for homeowners, renters and student debt borrowers who are behind on payments and looking for additional government assistance, according to Gary Engelhardt, professor of economics in the Maxwell School of Citizenship and Public Affairs at Syracuse University. To that end, Engelhardt said, the continued rollout of COVID-19 vaccines and the anticipated economic stimulus brought about by Biden’s proposed $1.9 trillion American Rescue Plan could have an enormous effect on the housing industry.
“A rapid rollout of vaccines will hopefully slow the virus and lead to a larger reopening of the economy later this year,” Engelhardt said. “This would help the labor market and give affected households the opportunity to get back to work, resume their housing and student debt payments, and pay back past-due amounts.”
Added Edward Seiler, MBA’s associate vice president of housing economics: “Providing targeted relief for those facing hardships until the ‘new normal’ will be key to preventing wider disruption to the housing market and overall economic recovery.”
Relief from property owners has been key; a reported 12% of renters received permission from their landlord to delay or reduce their monthly payment in December, according to the MBA.
In total, rental property owners reported a loss of $7.2 billion in revenue from missed rent payments in the fourth quarter of 2020 – down, however, from more than $9.1 billion in missed payments in the third quarter.
On the lending side, 5.3% of home owners missed one payment, 2.0% missed two payments, 1.5% missed three payments, and 4.9% missed four or more payments. In all, 18% of mortgage holders received permission from their lender to delay or reduce their monthly payment in December.
“This confidence is perhaps an indication that direct checks and enhanced unemployment benefits, rental assistance, mortgage forbearance programs, and a federal eviction moratorium have so far been effective in keeping people in their homes,” Engelhardt said.
Total missed student loan payments were estimated to be as much as $31.6 billion for the fourth quarter. Interestingly, the number of student loan borrowers who received unemployment benefits decreased to approximately 7% in December after hitting 8% in September.
Thirty-six million individuals have missed at least one student loan payment since the beginning of the pandemic.
The idea of cancelling student debt – or at least a large chunk of an individual’s balance – has been a hot topic since Joe Biden ran for and was elected president. Over the weekend, Democrats urged Biden to forgive $50,000 in student debt per debt holder.
Biden, who has said he supports up to $10,000 in student loan forgiveness per borrower, and his administration are reviewing whether it can take steps to provide student debt relief through executive action, according to the Associated Press.
Any debt relief would go a long way in helping student loan borrowers make housing payments, according to Senate Majority Leader Chuck Schumer (D-NY) and Senator Elizabeth Warren (D-MA), who are leading the group urging Biden to pass the $50,000 credit.