Stay With Me? What Happens To Loan Defaults/Forbearance When The Stimulus Wears Out In January? Kaboom Or …?

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by confoundedinterest17

Or stay with your family? Or live in your parents’ basement?

In January, much of the stimulus to households (CARES Act) wears out.

New forbearance plans have flattened after the Covid spike in March.

But ACTIVE forbearance plans remains high.

According to Attom, foreclosure starts are rising rapidly in New York and Chicago.

The MBA estimates 3.4 million homeowners are currently in forbearance plans. And if forbearance isn’t continued, a potentially high percentage of these loans could end up in default.

So we could have a mortgage default crisis on our hands. If forbearance doesn’t stop the impacts of Covid because of soaring, yet improving unemployment.

Rental markets? The CARES Act provided direct payments to households and if the government shutdowns persist, we could see an increased in defaults on multi-family properties. Freddie Mac’s forborne multifamily loans are concentrated in New York with 25.4% in forbearance followed by Texas with 13.4%.

The magnitude of the losses if the CARES Act isn’t extended? It depends on who wins in November.

But at we now know why Wells Fargo is trying to dump their $10 billion student-loan portfolio. The bank said earlier this month that it had notified customers of its planned exit from the student-lending business. PARTICULARLY IF THE CARES Act isn’t expanded OR governments stop their lockdown of economies.

The good news? The CARES Act money has not been completely spent … yet. But come January, watch out



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