Mortgage Bankers Association: Data Highlights Early COVID-19 Impact on Jobs, Individuals' Ability to Make Debt Payments

WASHINGTON, Sept. 18 (TNSRep) — The Mortgage Bankers Association issued the following news release on Sept. 17:

During the first three months of the COVID-19 pandemic, nearly 11 million households fell behind on their rent or mortgage payments and 30 million individuals missed at least one student loan payment, according to new research released today by the Mortgage Bankers Association's (MBA) Research Institute for Housing America (RIHA).

“Housing-Related Financial Distress During the Pandemic,” RIHA's report contains new, unreported data from an innovative household survey from the Understanding America Study (UAS), an internet panel survey of over 8,000 households specially tailored to study the impact of the pandemic. The study focuses on rent, mortgage, and student loan payment patterns from the second quarter of 2020.

According to RIHA's findings, the sudden onset of the pandemic led to abrupt rates of job loss or reduction of hours worked, along with jumps in unemployment insurance benefits received. However, federal government stimulus programs and employees being called back to work both appear to have helped most individuals make their housing payments. The report found that 11% (5.88 million) of renters reported a missed, delayed, or reduced payment, while 8% (5.14 million) of homeowners missed or deferred at least one mortgage payment.

“RIHA's study shows that households were largely successful in navigating a difficult economic landscape and continued to make their housing payments during the first three months of the outbreak. In contrast, nearly half of student debt borrowers missed at least one payment,” said Gary V. Engelhardt, Professor of Economics in the Maxwell School of Citizenship and Public Affairs at Syracuse University. “Data from other sources reveal that this trend has continued through August. With the first round of federal stimulus having run its course, and Congress deadlocked in passing another round of relief, families' continued ability to meet their housing obligations during the ongoing pandemic is critical to the health of the housing and mortgage industries.”

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Added Engelhardt, “The stubbornly high rates of new COVID-19 cases and the labor market's sluggish recovery both present significant challenges for household finances as the country enters the fall. Particularly for renters, the combination of those who missed a payment – or were offered and did not take it – is substantive enough to suggest real risk to their ability to make upcoming payments.”

Key Findings from RIHA's Study on Renters, Homeowners with Mortgages (Mortgagors), and Student Debt Borrowers Through June 30, 2020

* Unemployment and reduced hours spiked in early April for all three groups, followed by a decline in later weeks.

– The percentage of those who reported having lost a job in the past two weeks held steady throughout the quarter at around 2.5% of renters, 1.5% of mortgagors, and 2% of student debt borrowers.

– About 9% of employed renters, 8% of employed mortgagors, and 10% of student debt borrowers were working fewer hours than at the beginning of the pandemic.

– Receiving unemployment insurance (UI) benefits:

– Renters – 3% at the beginning of April to 12% by the end of June.

– Mortgagors – 3% at the beginning of April to 6% by the end of June.

– Student debt borrowers – rose from 3% at the beginning of April to 15% by the end of June.

* Minority groups were the most likely to miss rent, mortgage, and student debt payments.

* Property owners played a key role in helping renters to navigate payments.

– 10.5% of renters missed one payment over the quarter, 4.5% missed two payments, and 2.7% missed all three payments.

– * About 11% of renters reported missed payments each week over the quarter.

– 15% of renters received permission from their landlord to delay or reduce their monthly payment.

– * 37% of this subgroup of renters took up this offer and delayed or reduced a payment.

– Among those renters who did not receive permission, only 6.7% missed a payment.

– In aggregate, rental property owners lost as much as $9.1B in second-quarter revenue from missed rent payments.

* In part because of the mortgage forbearance program under the CARES Act, mortgagors were the least likely of the three groups to miss a payment during the second quarter: 5% of mortgagors missed one payment over the quarter, 2.8% missed two payments, and 3% missed all three payments.

– Consistent with MBA's second-quarter 2020 National Delinquency Survey delinquency rate of 8.22%, about 8% of mortgagors reported missed payments by week.

– Around 20% of mortgagors received permission from their lender to delay or reduce their monthly payment.

– 31% of this subgroup of mortgagors took up this offer and delayed or reduced a payment, which is consistent with MBA's Weekly Forbearance and Call Volume Survey data. Of those mortgagors not receiving permission, only 3.3% missed a payment.

– In aggregate, total missed mortgage payments were estimated to be as much as $16.3B for the quarter.

– Student debt borrowers were the most likely of the three groups to miss one or more payments.

– 19.3% of student loan borrowers missed one payment over the quarter, 16.4% missed two payments, and 12.9% missed all three payments.

– The percentage of borrowers reporting missed payments (by week) was around 46%.

– Throughout the quarter, roughly 65% of borrowers received permission from their lender to delay or reduce their monthly payment, and 57% of this subgroup of borrowers took up this offer and delayed or reduced a payment.

– Of those borrowers not receiving permission, 30.6% missed a payment.

– In aggregate, 30.2 million individuals missed at least one student loan payment since the beginning of the pandemic.

RIHA's report, authored by Engelhardt and Michael D. Eriksen, Associate Professor of Real Estate at the University of Cincinnati, provides close to real-time economic data on the rapidly evolving financial consequences of the pandemic by following the same set of households from before the outbreak through the end of June. Data from the third quarter will be released later this fall.

“RIHA's comprehensive study sheds light on questions regarding the impact of the pandemic that other industry data sources have been unable to answer,” said Edward Seiler, Executive Director, Research Institute for Housing America, and MBA's Associate Vice President, Housing Economics. “MBA continues to closely track the pandemic's effects on the housing and mortgage markets. This study is one of the many ways we're delivering real-time insights and analysis that are critical to members, policymakers, and consumers throughout the pandemic and subsequent economic recovery.”

MBA's RIHA is a 501(c)(3) trust fund. RIHA's chief purpose is to encourage and assist – through grants to distinguished scholars and subject matter experts, educational institutions, research facilities, and government organizations – establishment of a broader-based knowledge of mortgage banking and real estate finance. You can find additional studies on RIHA's website: www.housingamerica.org.

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Report: “Housing-Related Financial Distress During the Pandemic” – C:/Users/User/Downloads/21897_Research_RIHA_Pandemic_Payments_Report.pdf – By Gary V. Engelhardt and Michael D. Eriksen