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Americans skip 100 million loan payments as home foreclosure and eviction ban is extended

Americans skip 100 million loan payments as home foreclosure and eviction ban is extended
(Image credit: Pixabay)

More than 100 million loan payments are being skipped by Americans as the impact the coronavirus pandemic is having on household finances becomes ever clearer. 

According to the latest analysis (opens in new tab) from Transunion, the number of loan accounts in forbearance, deferred payment or some other type of relief totaled 106 million at the end of May, nearly three times higher than the 35 million accounts observed on April 30. 

Student loans suffered the largest increase, with 79 million accounts either deferred or in relief compared with 18 million a month earlier, while the number of auto loans subject to some kind of payment accommodation doubled to 7.3 million accounts. The 1.3 million personal loans (opens in new tab) in deferment is also twice the amount reported at the end of April, while rises have also been recorded among credit cards (opens in new tab), home equity lines of credit and mortgages (opens in new tab)

Debt and bills the main concerns

With household debt rising (opens in new tab), and many likely to have already used their coronavirus stimulus checks (opens in new tab), the sharp increase in missed payments further confirms the financial difficulties facing many Americans who have been left jobless or temporarily out of work following the COVID-19 outbreak. 

Americans skip 100 million loan payments as home foreclosure and eviction ban is extended

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Illustrating the pressures being felt, nine in 10 financially impacted consumers who have received some form of loan payment accommodation said their greatest concern was paying their bills and loans. Meanwhile, rising numbers of Americans (opens in new tab) have been seeking out personal loans and the services of the best debt consolidation companies (opens in new tab) as they look to better manage their debts amid the crisis. 

“The pandemic is complex, and as each lender-to-consumer arrangement may be different, there is no single, simple indicator of who is affected and who is not,” said Curt Miller, executive vice president of credit risk solutions at TransUnion.

Help available for borrowers

Both Government and financial service companies have worked hard to offer some support to struggling consumers. Most federal student loan payments have been suspended (opens in new tab), while the rest of the best student loan companies (opens in new tab) can be approached for some kind of forbearance if needed.

Credit card borrowers are being afforded assistance by card issuers (opens in new tab), while providers of the best auto loans (opens in new tab) and personal loan lenders are adopting similar approaches too, in the hope that the U.S. economy can soon get back on track, allowing consumers to start repaying what they owe. 

Homeowner protections extended

Homeowners have also been granted leeway when it comes to paying mortgages (opens in new tab), while bans on foreclosures and evictions that were due to end at the end of June have recently been extended. 

Last week, the Federal Housing Finance Agency (FHFA) announced (opens in new tab) that Fannie Mae and Freddie Mac will extend their single-family moratorium on foreclosures and evictions until at least August 31. The foreclosure moratorium applies to Enterprise-backed, single-family mortgages only. “During this national health emergency no one should worry about losing their home," said Director Mark Calabria.

Americans skip 100 million loan payments as home foreclosure and eviction ban is extended

(Image credit: ShutterStock)

At the same time, the Federal Housing Administration (FHA) confirmed (opens in new tab) it would also extend a moratorium through August for homeowners with FHA-insured single-family mortgages. These loans tend to help low- and moderate-income borrowers qualify for financing on their primary residences.

“While the economic recovery is already underway, many American families still need more time and assistance to regain their financial footing,” said U.S. Department of Housing and Urban Development Secretary Ben Carson. “Our foreclosure and eviction extension means that these families will not have to worry about losing their home as they work to recover from the financial impacts of COVID-19.”

Mortgage forbearance steadying

Offering slight encouragement, the latest Mortgage Bankers Association (MBA) data (opens in new tab) suggests the number of American homeowners entering forbearance could be stabilizing.

While almost 4.3 million mortgage loans were in forbearance as of June 7, the equivalent figure of 8.55% of mortgage loans was only slightly up on the percentage of 8.53% recorded a week earlier. Noting other potential positives, Mike Fratantoni, MBA's Senior Vice President and Chief Economist, said that half of the servicers in the survey had seen the forbearance share decline for at least one investor category. 

Mortgage refinance

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"Although there continues to be layoffs, the job market does appear to be improving, and this is likely leading to many borrowers in forbearance deciding to opt out of their plan," Fratantoni added.

Last month, restrictions were relaxed (opens in new tab) on those in forbearance, or who had just exited forbearance, but who wanted to refinance their mortgage or buy a new home. With mortgage rates from the best refinance mortgage companies (opens in new tab) continuing to hover at or near record-lows, homeowners have been told they could lower their monthly payments and save thousands of dollars (opens in new tab) over the lifetime of a loan by switching away from an expensive mortgage to a new lower rate mortgage deal. 

Are you struggling to keep up payments on your debt? The best debt consolidation companies (opens in new tab) could help you lower your monthly payments and save you money on your loan interest overall. 

With over 20 years’ experience in the financial services industry, Tim has spent most of his career working for a financial data firm, where he was Online Editor of the consumer-facing Moneyfacts site, and regularly penned articles for the financial advice publication Investment Life and Pensions Moneyfacts. As a result, he has an excellent knowledge of almost areas of personal finance and, in particular, the retirement, investment, protection, mortgage and savings sectors.