Persistent layoffs are dampening the momentum of the labor market, which bodes ill for the broader recovery in the United States, as millions of unemployed Americans delay their mortgage and rent payments.
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More than 6 million families stopped paying their rent or mortgage in September, according to the Mortgage Bankers Association’s America’s Housing Research Institute, a sign that the economic consequences of the coronavirus pandemic are weighing on unemployed Americans while Congress postpones relief measures.
In the third quarter, the percentage of homeowners and tenants late in their payments fell slightly from the previous quarter. Still, the total amount remains high, warn experts.
During the summer, rental and mortgage payment charges improved as states resumed business reopenings and more Americans returned to work. High unemployment, however, continues to pose difficulties for millions of families in the United States.
The unemployment rate fell to 7.9% from 8.4% in August, said the Department of Labor earlier this month. Overall, the economy is still recovering jobs in an extraordinary way after cutting a record 22.1 million in early spring, but the recovery is slowing.
In September, 8.5% of tenants, or 2.82 million households, lost, delayed or made a reduced payment, while 7.1%, or 3.37 million homeowners, did not pay the mortgage.
Tenants receiving unemployment insurance increased from 3% in early April to 7% in late September. Mortgages that received unemployment benefits remained unchanged at 3% during that period.
Congress stops in relief COVID-19
Congress has not approved additional coronavirus relief since March, when both chambers reached bipartisan commitments in a handful of projects that totaled more than $ 3 trillion, including one-time checks of $ 1,200 for Americans and an increase in unemployment of $ 600 a week. Economists fear that millions of American families face the prospect of falling further behind in the coming months without another much-needed round of federal aid.
“With the current eviction moratorium expiring in January, the situation could be even more challenging for tenants,” said Gary V. Engelhardt, professor of economics at the Maxwell School of Citizenship and Public Affairs at Syracuse University. “Many family renters across the country could be left homeless and unable to pay missed payments. ”
In September, the Trump administration implemented a national moratorium on residential evictions until the end of the year. The moratorium, which runs through December 31, applies to individuals who earn less than $ 99,000 a year and cannot afford rent or housing.
Republicans and Democrats have been at an impasse for months with the approval of a new coronavirus stimulus package, discussing issues such as the amount of money to give in federal unemployment insurance.
The Republican-controlled Senate must act in a $ 500 billion aid proposal next week, an amount rejected by Democratic congressmen as insufficient to face the pandemic. On Wednesday, Treasury Secretary Steven Mnuchin said it would be “difficult” to approve another COVID-19 aid package before the election.
26 million student debt debtors missed payments in September
Meanwhile, millions of student debt borrowers have delayed their payments, which could have ramifications on their credit, experts warn.
In September, some 26 million people missed their student loan payments. The proportion of student debt borrowers who missed a monthly payment has remained stable at 40% since May.
Student debt borrowers receiving unemployment increased from 3% in early April to 8% in late September. In August, the Trump administration extended the March relief and suspended student loan payments, stopped collections and waived interest on student loans held by the federal government until December 31.
But it does not cover private student loans. Most student loans, or about 92%, are owned by the United States Department of Education, according to MeasureOne, an academic data company. Private student loans represent 7.87% of total student loans outstanding in the USA.
“Borrowers who ended in default would see an adverse effect on their credit, which, in turn, would potentially make it more difficult for them to rent or qualify for a mortgage,” added Engelhardt.
According to the CARES Act passed in March, homeowners with loans who are facing financial difficulties because of the pandemic can request a tolerance of up to 180 days, which can be extended for an additional period of up to another six months if borrowers are still under financial duress.
Tolerance allows borrowers to pause or reduce their mortgage payments, but they will still have to repay missed payments in the future. But the relief under the CARES Act applies only to mortgages supported by the federal government. For those who have private or unsecured government loans, the options for tolerance or deferral are left to the loan manager.
This article was originally published in USA TODAY: More than 6 million families missed their rent or mortgage payment in September