High-Priced Loans More Likely to Be in Forbearance, Study Says

Dated: January 5 2021

Views: 31

As of Dec. 1, about 2.8 million homeowners are in a forbearance plan due to the COVID-19 pandemic. Homeowners who are struggling to make mortgage payments can request from their lender a pause or reduction in their mortgage payments for up to a year.

Forbearance rates are trending highest among higher-priced loans, which are considered loans with a rate spread of 1.5 percentage points or more, according to CoreLogic, a real estate data firm. On the other hand, forbearance rates are lowest for loans with a rate spread of 0–0.25%.

Forbearance is strongly tied to delinquency if a borrower’s financial situation does not improve by the end of their term.

“Higher-priced loans were more likely to experience forbearance than lower-rate spread loans,” according to CoreLogic’s analysis. Once their forbearance period is up, “there is a risk of an increase in mortgage foreclosure, especially among borrowers who remain in financial hardship and have little or no home equity.”

Still, there is hope. Not all forbearance loans are in delinquency, the researchers note. About 30% of homeowners with conventional loans in forbearance plans in October were still current on their mortgage payments. As such, some homeowners may be using forbearance as a fallback plan in case their finances worsen but haven’t needed it yet.

Blog author image

John Tocco

Having the right real estate agent means having an agent who is committed to helping you buy or sell your home with the highest level of expertise in your local market. This means also to help you in ....

Latest Blog Posts

Cost vs. Value: 2020 Home Improvement Projects With the Highest ROI

Curb appeal really does have a major impact on the return you'll see at resale. Among the top 10 home improvement projects with the highest return on investment (ROI) in Remodeling magazine's

Read More

High-Priced Loans More Likely to Be in Forbearance, Study Says

As of Dec. 1, about 2.8 million homeowners are in a forbearance plan due to the COVID-19 pandemic. Homeowners who are struggling to make mortgage payments can request from their lender a pause or

Read More

Sellers Likely to Keep Market Advantage Next Year

Buyer competition remains strong, and low inventory is pushing home prices to new highs—so sellers are likely to keep their market advantage next year, according to realtor.com®’s

Read More

Buying Frenzy Heats Up in Second-Home Market

Homes are selling much quicker than they did a year ago, and sales of resort and second homes are no different. “Properties are moving fast,” Gay Cororaton, senior economist and director

Read More