Coronavirus-related forbearance programs succeeded in limiting mortgage default, particularly among borrowers with the greatest financial need, the Government Accountability Office said, in a report released Monday.
GAO reported that Black and Hispanic borrowers, who were more likely to feel the economic effects of the pandemic, have used forbearance at about twice the rate of White borrowers.
The report stated that loans insured by the Federal Housing Administration had the highest rate of forbearance. Those loans are targeted to first-time, minority and low- and moderate-income homebuyers.
The GAO reported that nearly half of the loans that have entered forbearance since March 2020 were still in forbearance in February 2021.
However, GAO also warned that many borrowers may need additional help in making payments when forbearance ends.
Congress included forbearance provisions in coronavirus economic stimulus legislation in an effort to fend off foreclosures. And federal agencies have issued foreclosure moratoriums to help homeowners stay in their homes
“New foreclosures have declined and remained low during the pandemic because of federal foreclosure moratoriums,” GAO said. The report said that new foreclosures among all single-family loans declined by 85% in June 2020, compared with the previous June.
GAO said it has analyzed the National Mortgage Database and found that borrowers in forbearance will have to repay an average of eight monthly mortgage payments as forbearance ends. However, the GAO also said that the risk of a spike in defaults and foreclosures is somewhat mitigated by the strong equity position homeowners find themselves in as a result of soaring home prices.