The forbearance rate for mortgages backed by Fannie Mae and Freddie Mac dropped to a four-month low of 4.88%, while the overall rate was 7.2%, unchanged from the prior week, the Mortgage Bankers Association said in a report on Monday.
The GSE rate for the week ended Aug. 23 fell 5 basis points from the prior week, the MBA report said. The rate for mortgages packaged into Ginnie Mae securities, primarily loans backed by the Federal Housing Administration and the Veterans Administration, increased to 9.58% from 9.54%.
The July 31 expiration of the $600 a week unemployment payment that was part of the CARES Act is hitting FHA and VA borrowers first, said Mike Fratantoni, MBA’s chief economist.
“The loss of enhanced unemployment insurance benefits, coupled with a consistently high rate of layoffs and uncertainty about the job market, are having a disproportionate impact on FHA and VA borrowers,” Fratantoni said.
The Trump administration has replaced the CARES jobless benefit with a $300 a week payment using a Federal Emergency Management Fund intended for hurricane relief, but states need to update their systems to begin sending it out.
FEMA has approved applications from more than two dozen states to offer the “lost wages assistance,” but only a handful have finished reprogramming so they can begin the payments.
With the unemployment rate at 10.2%, higher than the worst month of the financial crisis, some economists have worried the forbearance rate could begin to rise after the lapse of the $600 weekly payment.
Also in the MBA report, the forbearance rate for private-label and portfolio mortgages, loans that aren’t eligible for government backing, rose to 10.44% from 10.37%.
Looking at mortgage servicing centers, the average length of calls rose to 7.7 minutes from 7.2 minutes, the MBA report said.
The abandonment rate, in which callers give up before speaking to a service-center worker, fell to 4.9% from 5.7%, the MBA report said.