A new study from
'Without forbearance, many of these households would have been forced to sell their homes or would have defaulted on their mortgages, which, in turn, could have depressed the housing market, leading to further defaults in a vicious cycle,' the report said.
Forbearance rates for home mortgages between March and June were almost 60 times higher than they were before the pandemic; the forbearance rate increased to 5.6% from 0.09% during a baseline period of
COVID-19-related mortgage forbearances reached a peak in
Loans with higher forbearance rates shared characteristics with those associated with higher default rates including a high loan-to-value ratio, low credit scores and high debt-to-income ratio, The rate of forbearance was lowest for loans with low monthly payments, according to the study, which also noted that 'forbearance largely occurs for households with positive equity that are experiencing a short-term liquidity problem. Among those who enter forbearance during the COVID-19 period, 0.3% of loans have negative equity. This is higher than for the entire sample, where only 0.1% of loans have negative equity.'
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