According to the Federal Reserve Bank of Atlanta, there is a significant threat that mortgage forbearance could quickly morph into mortgage foreclosure as the COVID-19 pandemic spikes in Texas, Arizona, California, Florida and other sunbelt states. With July 30th set as the end date for the $600-a-week federal enhancement to state unemployment benefits, which was aimed at fully replacing salaries of people who have lost jobs to the pandemic, the risk that forbearance to foreclosure will greatly increase. The Atlanta Fed economists said in a report that “The threat that forbearance will transition to foreclosure has regained momentum because the number of COVID-19 infections is increasing and the CARES Act unemployment insurance benefits will expire at the end of July.” The beefed-up unemployment benefits have kept forbearance rates lower than some of the most pessimistic forecasts of 20% to 30%. According to Black Knight, the forbearance rate was 8.6% of all active mortgages in the final week of June.
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