CONSUMER LOANS -- NO PAYMENT, NO PROBLEM !

SUMMARY:

If you can’t make payments 

on your mortgage, auto loan, 

credit card debt, or student loan, 

just ask for a deferral 

or forbearance.

You won’t have 

to make 

the payments.

And the loan 

won’t count 

as delinquent 

unless it 

was already

delinquent.

And you can “cure” 

a delinquency by 

getting the loan 

deferred and 

modified.

Loan delinquencies 

are being “cured” 

without payments ?

All the missed 

interest payments 

are added to the 

principal balance 

of the loan, so the 

debt burden grows.

Banks book the interest

income from "payments" 

that haven’t been made.

Consumers are not putting 

this "saved" money 

into a savings account 

for future debt payments,

-- they are spending it.

This spending 

of money intended

for debt payments,

that are not made 

on their debt , will

stimulate the economy.

Temporarily.

Like taking on new debt.

These programs 

are scheduled to end 

... and then what ? 

DETAILS:

Nearly all student loans 

go into forbearance, 

so delinquencies plunge.

Student loan borrowers 

were automatically 

rolled into forbearance 

under the CARES Act.

THE Department of Education 

decided to report as “current” 

all those loans in forbearance, 

even if they were already

delinquent. 

The New York Fed reported

the delinquency rate

 of student loan borrowers

FELL from

10.75% in Q1 2020

         to

 6.97% in Q2 2020, 

the lowest since 2007 !

88% of the 

student-loan borrowers, 

had a “scheduled

 payment of $0,” 

( in forbearance 

 until September 30 ).

As the percentage 

of delinquent loan

balances fell, 

the percentage

of “current” loan 

balances increased

to 96.4%, a record high 

in data available 

since 2003.

Loans  "accrue" interest

even though customers

don’t make any interest 

or principal payments !

About 5.9% of the $1.34 trillion 

in auto loans – $79 billion --

are in forbearance, 

according to the 

New York Fed. 

Newly delinquent auto loans 

dropped to 6.29% -- they were 

above 10% for nearly two years

during the Great Recession 

of December 2007 !

7.8% of all home mortgages 

are currently in forbearance,

adding up to $730 billion.

Mortgages were modified, 

rolled into forbearance, 

and deemed "current".

61% of the 30-60-day late

mortgages were “cured” 

that way in Q2:

The CARES Act provides 

mortgage forbearance 

for 180 days for federally

insured mortgages.

And then what ?