gao home mortgage defaults and foreclosure and race

Note: Foreclosure data were only available through February 2021 at the time of our review. 2).įigure 2: Number of Single-Family Mortgage Loans Entering Foreclosure, by Month (June 2019–February 2021) The number of mortgages entering foreclosure decreased by about 85 percent on a year-over-year basis from June 2019 to June 2020 and remained as low through February 2021, according to mortgage data provider Black Knight (see fig. In addition, the Consumer Financial Protection Bureau (CFPB) amended mortgage servicing rules in June 2021 to require servicers to discuss forbearance options with borrowers shortly after any delinquency.įoreclosures declined significantly during the pandemic because of federal moratoriums that prohibited foreclosures. Federal agencies and the government-sponsored enterprises Fannie Mae and Freddie Mac (the enterprises) have taken steps to make these borrowers aware of forbearance options, such as through direct phone calls and letters.

For example, these borrowers tended to have lower subprime credit scores, indicating an elevated risk of default, compared to borrowers who were current or in forbearance, who tended to have higher prime or near prime credit scores. Yet, borrowers who have not used forbearance may be at a greater risk of default and foreclosure, according to GAO's analysis of the National Mortgage Database. 1).įigure 1: Estimated Percentage of Single-Family Mortgage Loans in Forbearance, by Loan Type (January 2020–February 2021)Ī small percentage of borrowers who missed payments during the pandemic have not used forbearance-less than 1 percent of those covered by the CARES Act. Forbearance was also more common among borrowers at a greater risk of mortgage default-specifically, first-time, minority, and low- and moderate-income homebuyers with mortgages insured by the Federal Housing Administration and rural homebuyers with loans guaranteed by the Rural Housing Service (see fig. In addition, Black and Hispanic borrowers, who were more likely to have been economically affected by the pandemic, used forbearance at about twice the rate of White borrowers. As of February 2021, about half of all borrowers who used forbearance during the pandemic remained in forbearance. Use of the forbearance provision peaked in May 2020 at about 7 percent of all single-family mortgages (about 3.4 million) and gradually declined to about 5 percent by February 2021, according to GAO's analysis of the National Mortgage Database. This provision allowed borrowers with loans insured, guaranteed, made directly, purchased, or securitized by federal entities (about 75 percent of all mortgages) to temporarily suspend their monthly mortgage payments.

Many single-family mortgage borrowers who missed payments during the pandemic used the expanded mortgage forbearance provision in the CARES Act.

Gao home mortgage defaults and foreclosure and race