Without mortgage forbearance, many homeowners may have defaulted or been forced to sell their homes during the COVID-19 pandemic, research from Freddie Mac shows.
These forced sales could have depressed the housing market, leading to further defaults, according to the company’s most recent Insight Report.
“Mortgage forbearance provides liquidity to households and plays a vital role in mitigating the damage to homeowners during times of crisis whether it be a hurricane, wild fire, or health epidemic,” says Sam Khater, chief economist for Freddie Mac, in a statement. “Research on this topic is important because it will help us prepare for the next several months as we continue to navigate the COVID-19 pandemic, and beyond.”
Mortgage forbearance temporarily removes the obligation for borrowers to make their monthly mortgage payment. Forbearance plans are typically used by borrowers who experienced a sudden loss of employment, a reduction in income or damage from a natural disaster.
The report shows that U.S. forbearance rates during the period from March to June of this year were on a similar in level to those experienced from August 2017 to December 2017 in areas impacted by the major storms.