As the coronavirus pandemic continues to devastate the economy around them, an alarming share of people holding America’s most accessible and affordable mortgages are behind on payments.
Around 16 percent of Federal Housing Administration mortgages were in delinquency in the second quarter, according to Bloomberg. That’s the highest percentage in delinquency going back at least four decades to records starting in 1979.
FHA mortgages are generally made to first-time homebuyers and low-income borrowers with credit scores too low to qualify for traditional mortgages. They also allow borrowers to buy with a smaller down payment.
Delinquency rose from 9.7 percent in the first quarter. In the second quarter, 6.7 percent of conventional mortgages are delinquent.
Some borrowers stopped paying their mortgages after losing their jobs during the pandemic. FHA mortgage holders are protected from foreclosure by a federal forbearance program, at least in the short term. The program allows borrowers to delay payments for up to a year without any penalties, according to Bloomberg.
The pandemic is impacting the housing market in other ways. Federal interest rates cuts have sent interest rates on the 30-year conventional loan below 3 percent, their lowest in 50 years.
But home prices are at record levels in some markets and economic volatility has prompted some lenders to tighten their standards to the point of refusing borrowers they would normally accept. The nature of the pandemic has hampered the ability to close deals. [Bloomberg] — Dennis Lynch