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Millions of Americans have been financially affected by the coronavirus pandemic. Fortunately, there has been relief available to homeowners in the form of mortgage forbearance.

Normally forbearance, which allows you to take a break from your mortgage payments for a period of time, is something a lender can deny. During the pandemic, however, lenders are required to allow you to suspend mortgage payments for an initial period of 180 days, followed by a 180-day extension, which gives you the option of not paying your mortgage for a period of time. year.

While many homeowners rushed to ask for forbearance in April, May and June once that option became available, at the end of June the number of requests declined. But now the weekly abstention rate in the United States has increased for the first time since June 22, reports the Mortgage Bankers Association. The percentage of mortgages in forbearance increased only slightly from 5.47% to 5.48%, but it is still a slight increase given that around 37.1 million loans are taken into account. in this calculation.

Why are abstention rates on the rise?

The short answer is that more homeowners have entered into forbearance plans than they have left. At this point, some borrowers who applied for forbearance earlier in the year have reached the end of the initial 180-day period and have not extended by 180 days. But according to the Mortgage Bankers Association, 76.76% of home loans withheld are in a sort of extension beyond their initial 180-day period, up from 76.4% a week earlier.

Should You Forbear Your Mortgage?

If you can’t keep up with your monthly payments, it’s worth considering. Under normal circumstances, forbearance can serve as a black spot on your credit report (although it won’t do much of the same damage as a delay in your mortgage payments or, even worse, a foreclosure). During the pandemic, however, abstention cannot hurt your credit. So if you can’t pay your mortgage payments and you’re not interested in selling your home, forbearance is a good way to preserve your mortgage. credit rating and stay in good standing with your lender.

Of course, the downside to forbearance is that once this arrangement is completed, you will have to repay the payments you missed. The details depend on the agreement you make with your lender. If you can afford to make partial payments while your home loan is in arrears, do them, as this will give you less to make up for later.

If you are able to pay your mortgage payments most of the time but find that you are a little shy each month, you can also consult refinancing instead of suspending your loan payments. If you are able to significantly lower your interest rate with refinancing, it could lower your mortgage payment to the point where it is affordable, and that way you won’t get stuck in catch-up mode down the line. But you’ll need a strong credit score to get a competitive refinance rate, so if you don’t have one, then forbearing may be a good option.

Is a rising abstention rate bad omen for the economy?

Maybe, but not necessarily. While a rising abstention rate could mean more borrowers are struggling financially, it could also mean more of them realize they can put their mortgage payments on hold. And given the slight increase in forbearance requests, there is no reason to raise a major alarm. However, it will be interesting to see which direction rates move as we move towards the end of 2020.