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TransUnion: the percentage of accounts in financial hardship began to level off in June

Lender accommodation programs credited with recent stabilization

The percentage of accounts with mortgage loans in “financial hardship” fell from 7.48% in May to 6.79% during the month of June, according to a consumer credit snapshot by TransUnion.

The report defines accounts with deferred payments and forbearance programs as those in financial hardship and credits lender accommodation programs as a leading factor in these account’s recent stabilization.

Month over month, the percentage of accounts with financial hardship delinquency status fell in every loan type for the month of June – including those Fannie Mae, Federal Housing Administration, Freddie Mac, United States Department of Agriculture, Veteran’s Administration and jumbo loans.

However, looking at year-over-year numbers, every loan type’s percentage of hardship accounts gained in June over 2019, the report said.

FHA loans took the lion’s share with 14.98% accounts in hardship last month. However, that number was down from 16.17% in May. The next largest percentage were those with USDA loans, which fell from 11.47% in May to 9.15% in June.

“In the early months of the pandemic, unemployment benefits and relief from the CARES Act gave consumers a bit of a cushion, leaving the consumer fairly well-positioned from a cash flow perspective,” said Matt Komos, vice president of research and consulting at TransUnion. “Lenders have been working with consumers during this time of uncertainty by extending financial hardship offerings that help them understand and manage their financial situation.”

Since the beginning of the pandemic in March, consumer-level delinquency performance stayed relatively steady as the percentage of mortgage loans 60 days or more past due fell month-over-month to 1.07% in June from 1.14% in May, according to the report.

TransUnion’s Financial Hardship Survey revealed that of consumers with a current financial accommodation on a loan, the top three preferences for repayment were:

  • 32% in favor of repayment plans that will allow for paying down debt gradually while continuing regular payments
  • 21% would like extended financial accommodations for another few months
  • 18% preferred paying off all postponed payments with a lump sum

“By many accounts, we are still in the early phase of the pandemic, and there is some uncertainty still around the nature of the economic recovery we may experience,” Komos said.

“It will likely be months before the financial impacts of COVID-19 begin to materialize from a credit-performance standpoint, and some of this will be dependent on any additional government actions. During this period of time, lenders will need deeper consumer insights to better calibrate risk across their portfolios and make more informed decisions.”

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