Borrowers missed $19.4B in third-quarter mortgage payments

A study from the Mortgage Bankers Association's Research Institute for Housing America showed 12.4% of homeowners missed loan payments across the second and third quarters, including 7.1% — an estimated 3.37 million borrowers — for September alone.

About 4.7% of borrowers missed one payment over the past two quarters, 2% missed two, 1.5% missed three and 4.2% missed four or more. Third-quarter deferrals amounted to $19.4 billion in missed mortgage payments. The research revealed a slight improvement in the third quarter as more people returned to work, but that may not be indicative of future loan performance as uncertainty lies ahead.

"There is growing concern that absent a slowdown in the number of coronavirus cases and another round of much-needed federal aid, millions of households in the coming months face the prospect of falling further behind," Gary Engelhardt, professor of economics at Syracuse University, said in the report.

The latest forbearance report from Black Knight illustrated a similar development. After the number of mortgages going into forbearance dropped by the greatest degree of the COVID-era the week prior, about 19,000 loans entered active forbearance plans the seven days ending Oct. 13. Black Knight predicts elevated borrower distress through 2021.

The coronavirus has made an even larger impact on rent and student debt. Missed rent payments totaled of $9.2 billion in the third quarter, according to the MBA's housing report. In the second and third quarters, 11% of renters missed one payment, 4% missed two, 2.8% missed three and 3.8% missed four or more.

Student loans cast an even bigger shadow, accounting for $29.5 billion in missed payments. Approximately 16.2% of student loan borrowers missed one payment since April, 8.8% missed two, 7% missed three and 22.7% missed four or more.

While not impacting mortgages directly, the adjacency to the market will have secondary effects.

"The tens of millions of student debt borrowers behind on their payments also has future ramifications for the housing and mortgage markets," Engelhardt said. “Borrowers ending up in default would see an adverse effect on their credit, in turn making it potentially more challenging for them to rent or qualify for a mortgage."