The number of mortgage holders receiving temporary relief on their monthly payments fell last week to its lowest level since the Spring. According to Black Knight, there were 2.735 million home loans in forbearance as of Nov. 10, down 4% (or 121,000) from the week before. And there is room for continued optimism: The 68,000 loans entering forbearance last week was the smallest weekly increase since early October, and less than half of these (31,000) were new forbearance starts rather than loans that re-entered forbearance — also a new pandemic low. This decreased participation rate continues a promising trend for mortgages that has formed in recent months, but risks do remain. In particular, nearly 1.1 million (or 9.1%) of loans managed by the FHA or VA – loans that generally tend to have higher loan-to value-ratios – continue to receive assistance and have seen less-significant reductions in relief program participation.
More than eight months into the pandemic, state and local governments continue to struggle to distribute relief funds made available through the CARES Act, threatening their prospects of receiving any additional relief. A report from the Washington Post outlines several cases in which communities have been unable to distribute their portion of the $150 billion in relief funding that Congress first approved for state and local governments in March. According to the report, a combination of political disagreements and complicated rules contributed to the slow rollout and ongoing confusion surrounding the distribution of the funds. Language barriers and eligibility constraints also appear to be hindering distribution, with rental assistance seeing particularly low application and qualification rates. States and nonprofit organizations are now scrambling to distribute the funds before the end of the year, when any unused money will be returned to the federal government. The poor rollout of these funds also jeopardizes subsequent relief packages. Opponents of additional funding often point to the weak usage of the initial wave of funding as a reason not to extend more, even though evidence is mounting that the need for additional relief remains acute.
It’s possible that the nationwide surge in coronavirus cases could result in stricter business restrictions and/or a return to localized lockdown orders in coming weeks, but evidence is emerging that consumers are already pulling back heading into the holiday season. Consumer optimism — particularly their view for the next few months — fell from October according to the University of Michigan, and higher frequency indicators show a similar pattern. A weekly read on consumer sentiment by Morning Consult showed that overall consumer confidence fell by more in the week ending November 10 than it has in any week since March. Spending is also falling. A recent report from the JP Morgan Chase Institute found that as of November 9, purchases made using Chase credit and debit cards fell 7.4% year-over-year. Spending in Iowa and North Dakota – two places where the coronavirus case volumes have quickly risen of late — has slowed most notably. Other indicators – including daily transit usage and in-person dining — are showing similar slowdowns that go beyond seasonality. Taken together, this suggests that consumers are altering their outlook and behavior in response to recently rising case volumes.
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