The COVID-19 pandemic and associated lockdowns in 2020 led to over 9 million U.S. workers losing their jobs. Of those who didn’t, some took pay cuts or had their employment hours reduced. This put a strain on the ability of many Americans to keep up with their mortgage payments. (Here are the states with the most mortgage debt.)
Struggling homeowners have received some temporary relief. The federal Coronavirus Aid, Relief and Economic Security Act, signed into law in March 2020, included provisions for mortgage forbearance — meaning that homeowners with federally backed mortgages could suspend their monthly payments. The forbearance relief was extended for as long as 12 months in September of 2021.
When forbearance ends, however, homeowners need to contact their lenders or loan servicers to arrange a plan for catching up with the payments that were deferred. As of February 2021, according to the Government Accountability Office, homeowners in forbearance had accumulated an average of eight mortgage payments that will have to be repaid. This will leave some homeowners in debt for tens of thousands of dollars. (Here are the states where people are struggling the most with debt.)
The GAO found that forbearance was more common among certain demographics at greater risk of mortgage default, including first-time homebuyers, low and moderate-income buyers with Federal Housing Authority and Rural Housing Service loans, and minorities. Black and Latino homeowners — who are more likely to have been negatively impacted by the pandemic — had used forbearance at twice the rate of white homeowners.
Although some borrowers are back on their feet and out of forbearance and currently working to get up to date on their payments, many are still behind and could face foreclosure. Others didn’t qualify for relief in the first place and are currently in default.