MBA: more than six million renters and homeowners missed their September payments

On Friday, a day after the U.S. Department of Labor reported that the number of jobless claims for the previous week hit its highest level since August 22, the Mortgage Bankers Association’s Research Institute for Housing America released worrying third quarter data that says more than six million renters and homeowners missed their September payments.

According to RIHA, the percentage of homeowners and renters behind on their payments fell compared to Q2, when 11 percent (5.9 million) of renters missed, delayed, or reduced payments and eight percent (5.1 million) homeowners missed or deferred at least one mortgage payment. By September, 8.5 percent of renters and 7.1 percent of homeowners were behind on their payments.

The improving numbers, while a welcome sign of stability, haven’t been enough to quell concerns around the country’s stubbornly elevated unemployment levels.

“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,” said Gary V. Engelhardt, Professor of Economics in the Maxwell School of Citizenship and Public Affairs at Syracuse University.

Engelhardt added that when the Centers for Disease Control and Prevention’s current eviction moratorium expires in January, renters could be facing more dire circumstances.

“Many renter households across the country could find themselves with no place to live and no means to repay missed payments,” he said.

The study found that 40 percent – over 26 million – student debt borrowers also missed their September payments, a level of delinquency that has remained consistent since May. Engelhardt says the struggles of student loan holders could have negative implications for the housing and mortgage markets.

“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.

Key findings

Looking at the various data points provided by RIHA, it’s clear that mortgage-holders have fared better than renters and student debt borrowers during the COVID-19 pandemic.

In April, three percent of mortgagors, renters and student debt borrowers were receiving unemployment insurance benefits. By the end of September, that figure had grown to seven percent for renters and eight percent for students. For homeowners, it remained unchanged.

Student loan holders were found to be the most likely of the three groups to miss one or more payments. Just over 16 percent of them missed one payment over the second and third quarters of 2020, compared to 11 percent of renters and 4.7 percent of mortgagors, while 8.8 percent missed two payments, more than double the rate of renters and more than four times that of homeowners.

Interestingly, the percentage of each group that missed four or more payments across Q2 and Q3 was actually higher than the percentage that missed three payments: 3.8 percent of renters, 4.2 percent of mortgagors and a relatively ungodly 22.7 percent of renters missed four payments or more in the two quarters.

The missed payments are leaving gaping holes in balance sheets. RIHA estimates rental property owners lost up to $9.2 billion in Q3 revenue due to missed rent payments, while missed mortgage payments were calculated to be as high as $19.4 billion. Missed third quarter student loan payments were estimated to be in the neighborhood of $29.5 billion.

Edward Seiler, RIHA’s executive director and MBA’s associate vice president of housing economics, says the financial distress laid out in the report “highlights the need for all stakeholders to come together to provide meaningful solutions to those who will need it most in the coming months.”