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Mortgage forbearance rate drops to a three-month low

4.1 million borrowers are in forbearance this week, 7.7% of all mortgages, Black Knight says

The U.S. mortgage forbearance rate dropped to a three-month low of 7.7% this week as more Americans were able to pay their loans on time, Black Knight said in a report on Friday.

It was the lowest share of mortgages with suspended payments since late April, when New York was the center of the COVID-19 pandemic. That share represents 4.1 million loans that remain in forbearance as of July 28, Black Knight said.

The data was released on the same day as the expiration of the $600 per week federal unemployment benefit, part of the CARES Act passed by Congress to keep jobless Americans current on their bills.

Typically, unemployment insurance only replaces about 50% of a person’s former salary. Forbearances could begin to increase again because of the lapse of the enhanced beneft, according to Lawrence Yun, chief economist of the National Association of Realtors.

“The number of requests for forbearance could rise,” Yun said. “Whether it’s one percentage point or two percentage points, I couldn’t say.”

Applications for unemployment benefits climbed last week for the second consecutive gain as COVID-19 infections surged in some of the nation’s biggest states.

The Senate adjourned for the weekend on Thursday night without reaching an agreement on extending the enhanced unemployment benefits. The House of Representatives passed the Heroes Act in May that extends the $600-a-week benefit through January.

The Senate began considering COVID-19 relief earlier this week and has proposed a HEALS Act that hasn’t yet been released in full or been voted on. It would reduce the enhanced jobless benefit to $200 a week, according to Majority Leader Mitch McConnell.

White House Chief of Staff Mark Meadows asked the Senate to pass a week-long extension of the $600 benefit so it wouldn’t lapse before they could find a solution, but couldn’t get a deal done, Beacon Policy Advisors said in a note to clients.

Many Republicans, including Treasury Secretary Steven Mnuchin, want to reduce the unemployment benefit to 70% of an unemployed person’s former salary, though state agencies that oversee the benefit have said it would take up to five months to upgrade their systems to be able to do that.

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