Millions Still Missing Rent, Mortgage Payments

While many economic signs have indicated the economy is recovering from the pandemic recession, some economists remain concerned that progress is threatened by persistently high unemployment rates, new rounds of layoffs and the depletion of savings for hard-hit workers two months after the expiration of federal pandemic unemployment benefits.

On Friday, the Mortgage Bankers Association released a report that found 8.5% of renters, or 2.8 million households, missed, delayed or made a reduced payment during the third quarter, while 7.1% (3.4 million homeowners) missed their mortgage payment.

About 40% of student debt borrowers missed a monthly payment, a rate that has held steady since May.

Households with payment shortfalls fell from 11% of renters and 8% of homeowners in the second quarter, which was reported Sept. 17 in the first round of the “Housing-Related Financial Distress During the Pandemic” study conducted by the MBA’s Research Institute for Housing America.

Gary V. Engelhardt, an economist at Syracuse University and one of the study’s authors, said payment rates improved in the third quarter as more people went back to work, but unemployment remains high, placing extended hardships on millions of U.S. households.

“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,” Engelhardt said.

“With the current eviction moratorium expiring in January, the situation could be even more challenging for renters,” he said. “Many renter households across the country could find themselves with no place to live and no means to repay missed payments.”

CUNA economist Jordan van Rijn, interviewed Wednesday, said he was concerned by the MBA’s first-round report of the high percentage of households unable to pay rent.

And van Rijn said he sees “red flags” in jobless numbers: A rise in long-term unemployment and a reduction in the labor force that indicates some people have given up on looking for a job.

There were 12.6 million jobless people looking for work in September, still more than double the number of unemployed a year earlier.

Meanwhile, many people have given up trying to find a job, exiting the labor force, which is the denominator of the unemployment rate. The civilian labor force stood at 160.1 million in September, 3.9 million fewer than a year earlier.

Overall unemployment went from 3.5% in February, the month before COVID-19 was declared a pandemic, to a high of 14.7% in April. It has been ebbing since then and was 7.9% in September, when there were 12.6 million people looking for work.

In April and May the unemployment rate was especially high, but 90% of the job losses were considered temporary. The jobless rate has since fallen, but only about half of them are temporary and about a third are permanent.

Van Rijn said unemployment claims are still at historic highs, and job postings on Indeed.com are down 20% from a year ago.

“It’s good that we’re seeing the decrease in the unemployment rate, but we’re reaching that point where it will be harder and harder going forward to get more jobs back and continue this recovery,” he said.

The MBA’s financial distress report was based on a survey of more than 8,000 households, and followed the same set of households from before the outbreak through the end of September.

The study found 26 million people had missed their student loan payments in September alone, which Engelhardt said could damage the housing and mortgage markets in the future.

“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,” he said.

Other key findings of the third-quarter survey included:

• Renters receiving unemployment benefits rose from 3% at the beginning of April to 7% by the end of September, while the rate for homeowners with mortgages was unchanged at 3%.
• Among renters, 11.0% missed one payment in the six months of the survey, 4.0% missed two payments, 2.8% missed three payments and 3.8% missed four or more payments.
• Mortgagors were less likely to miss a payment from April through September with 4.7% missing one payment, 2% missing two, 1.5% missing three and 4.2% missing four or more.
• Landlords gave 13% of renters permission to delay or reduce their monthly payment, while lenders gave 20% of homeowners permission for delayed or reduced payments.
• Rental property owners lost as much as $9.2 billion in third-quarter revenue from missed rent payments.