Billions Lost: How The COVID-19 Pandemic Impacted Renters, Mortgage Holders And Student Loan Borrowers

In the second quarter of 2020 – coinciding with the first three months of the COVID-19 pandemic -- nearly 11 million American households fell behind on their rent or mortgage payments while 30 million people skipped at least one payment on their student loans, the Mortgage Bankers Association reported Friday.

The report by the MBA's Research Institute for Housing America found while the emergence of the pandemic triggered huge job losses or a reduction in work hours, stimulus programs provided by the federal government – as well as people being called back to work when lockdowns eased – allowed most Americans to meet their housing payments.

Specifically, 11% (or 5.88 million) of renters missed, delayed or reduced payments during the second quarter while 8% (or 5.14 million) of homeowners missed or deferred at least one mortgage payment.

The report also revealed about 9% of employed renters, 8% of employed mortgagors and 10% of student debt borrowers worked fewer hours during the second quarter than at the beginning of the pandemic.

Some 12% of renters, 6% of mortgagors and 15% of student loan borrowers were receiving unemployment insurance benefits by the end of June – up from 3% for each group at the beginning of April.

Among renters, 10.5% missed one payment during the second quarter, 4.5% missed two payments and 2.7% missed all three payments. However, some 15% of renters received permission from their landlords to postpone or reduce their monthly payment. Interestingly, only 37% of this latter subgroup of renters accepted the offer to delay or reduce a payment.

In total, rental property owners lost as much as $9.1 billion in second quarter revenues from missed rent payments.

Mortgage-holders fared much better than renters, partly due to the mortgage forbearance program under the federal government’s Coronavirus Aid, Relief and Economic Security Act.

During the second quarter, 5% of mortgagors missed one payment, 2.8% missed two payments and 3% missed all three payments.

About 20% of mortgagors received permission from their lenders to postpone or reduce their monthly payment – and 31% of this subgroup of mortgagors took up this offer.

On the whole, total missed mortgage payments amounted to some $16.3 billion for the quarter.

"Households were largely successful in navigating a difficult economic landscape and continued to make their housing payments during the first three months of the outbreak,” said Gary V. Engelhardt, professor of economics at Syracuse University and one of the report's authors. "Data from other sources reveal that this trend has continued through August. With the first round of federal stimulus having run its course, and Congress deadlocked in passing another round of relief, families' continued ability to meet their housing obligations during the ongoing pandemic is critical to the health of the housing and mortgage industries."

Engelhardt added: "The stubbornly high rates of new COVID-19 cases and the labor market's sluggish recovery both present significant challenges for household finances as the country enters the fall. Particularly for renters, the combination of those who missed a payment -- or were offered and did not take it -- is substantive enough to suggest real risk to their ability to make upcoming payments."

In addition, nearly half of student debt borrowers missed at least one payment during the first three months of the pandemic.

Specifically, over the second quarter, 19.3% of student loan borrowers missed one payment, 16.4% missed two payments, and 12.9% missed all three payments.

About 65% of student loan borrowers received permission from their lender to postpone or reduce their monthly payment -- about 57% of this subgroup took up this offer.

Some 43 million adults have a federal student loan, according to the U.S. Department of Education. In the aggregate, they have more than $1.5 trillion in loans outstanding.

“Like renters, those with student loans fared comparatively poorly in the labor market,” the report stated. “They had high rates of unemployment and take-up of unemployment insurance benefits. Those who kept their jobs had a high incidence of hours’ reductions. This found its way into [student loan] payments.”

On Thursday, Senate Minority Leader Chuck Schumer, D-N.Y., and Sen. Elizabeth Warren, D-Mass., unveiled a resolution calling on President Donald Trump to issue an executive order to forgive up to $50,000 in debt for student loan borrowers.

The debt is particularly burdensome on blacks, women and low-income earners.

“The current public health and economic crisis caused by the COVID-19 pandemic has only exacerbated the urgency to respond to a student loan crisis that continues to disproportionately affect Black borrowers and other borrowers of color, women, veterans and low-income families,” said Ashley Harrington, the advocacy director and senior counsel at the Center for Responsible Lending, in a statement. “We applaud Senators Warren and Schumer for drafting a plan that would provide crucial student debt relief.”