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Mortgage forbearances drop to a two-month low

4.14 million borrowers are in forbearance this week, 7.8% of all mortgages

There are 4.14 million mortgages in forbearance this week, a two-month low, Black Knight said in a report on Friday.

The number dropped by 435,000 from last week – the largest decline of the pandemic, according to the report.

Measured as a share of all mortgages, the forbearance rate fell to 7.8% from 8.6% in the prior week, the report said.

The decline comes as the number of COVID-19 infections spikes to record levels in several of the nation’s largest states, including Texas and California, which could fuel layoffs. Also looming is the July 31 expiration date of the CARES Act’s beefed-up unemployment benefit that could lead to an increase in forbearance requests.

“Recent spikes in COVID-19 around much of the country and the scheduled expiration of expanded unemployment benefits both represent significant uncertainty for the weeks ahead,” said Andy Walden, an economist and director of market research for Black Knight.

About 6% of mortgages backed by Fannie Mae and Freddie Mac are now in forbearance, down from 6.8% last week, the report said. That’s about 1.7 million mortgages with an unpaid principal balance of $354 billion.

About 11.6% of home loans back by the Federal Housing Administration and the Veterans Administration have suspended payments, down from 12.3% last week, Black Knight said. That’s about 1.4 million home loans with an unpaid principal balance of $240 billion, according to the report.

In addition, there are 1.1 million private-market mortgages in forbearance, representing an 8.2% share, down from 9.3% last week, Black Knight said. Private-market mortgages aren’t backed by a government agency or a GSE. They could be jumbo mortgages held by banks or home loans packaged into private-label bonds. The unpaid principal balance for those mortgages is $304 billion.

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