Persistent layoffs are slowing momentum in the labor market, which bodes poorly for the broader U.S. recovery as millions of out-of-work Americans delay their mortgage and rent payments.
More than 6 million households failed to make their rent or mortgage payments in September, according to the Mortgage Bankers Association’s Research Institute for Housing America — a sign that the economic fallout from the coronavirus pandemic is weighing on jobless Americans as Congress stalls on relief measures.
In the third quarter, the percent of homeowners and renters behind on their payments fell slightly from the prior quarter. Still, the overall amount remains high, experts say
Over the summer, rent and mortgage payment collections improved as states resumed business reopenings and more Americans returned to work. High unemployment, though, continues to place hardships on millions of U.S. households.
The unemployment rate fell to 7.9% from 8.4% in August, the Labor Department said earlier this month. Overall, the economy is still regaining jobs in outsize fashion after shedding a record 22.1 million in early spring, but the recovery is slowing.
In September, 8.5% of renters, or 2.82 million households, missed, delayed or made reduced payments, and 7.1%, or 3.37 million homeowners, missed their mortgage payments.
Renters receiving unemployment benefits rose from 3% in early April to 7% by the end of September. Mortgage-holders getting jobless aid remained unchanged at 3% in that same period.
Congress hasn’t approved additional coronavirus relief since March, when the House and Senate came to bipartisan compromises on a handful of bills that totaled more than $3 trillion, including onetime $1,200 checks to Americans and a $600 weekly unemployment boost. Economists worry that millions of U.S. households face the prospect of falling further behind in the coming months without another round of much needed federal aid.
“With the current eviction moratorium expiring in January, the situation could be even more challenging for renters,” said Gary V. Engelhardt, professor of economics in the Maxwell School of Citizenship and Public Affairs at Syracuse University. “Many renter households across the country could find themselves with no place to live and no means to repay missed payments.”
In September, the Trump administration implemented a national moratorium on residential evictions through the end of the year. The moratorium, which will run through Dec. 31, applies to individuals earning less than $99,000 a year who are unable to make rent or housing payments.
And millions of student borrowers have fallen behind on their payments, which could have ramifications on their credit, experts caution.
In September, about 26 million people missed their student loan payment. The proportion of student borrowers who missed a monthly payment has remained steady at 40% since May.
Student borrowers receiving unemployment rose from 3% in early April to 8% by the end of September. In August, the Trump administration extended relief from March and suspended student loan payments, stopped collections and waived interest on federally held student loans until Dec. 31.
But that doesn’t cover private student loans. Most student loans — about 92% — are owned by the U.S. Department of Education, according to MeasureOne, an academic data firm. Private student loans make up 7.87% of the total outstanding U.S. student loans.
“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,” Engelhardt said.
Under the CARES Act passed in March, homeowners with loans who are struggling financially because of the pandemic can request a forbearance for up to 180 days, which might be extended as long as another six months if borrowers still are under financial duress.
Forbearance allows borrowers to pause or reduce their mortgage payments. They still have to repay those missed payments in the future.
But the CARES Act relief applies only to federally-backed mortgages. For those who have non-government-backed or private loans, the forbearance or deferment options are at the discretion of the loan servicer.
Read more at USA Today.