U.S. lenders say they expect most borrowers who were given a temporary reprieve on loans due to income loss from the impact of COVID-19 will resume payments soon.
The Financial Times reported 40 percent of customers granted forbearance continued to create full payments on their loans.
These short-termed agreements can finish later this month and bank executives say many clients haven't been as hard hit by the pandemic because they feared.
Banks estimate between 4 and 22 percent of borrowers received as much as 90-day payment holidays as the economic impact from the coronavirus pandemic threatened their livelihoods, according to an analysis by Autonomous based on public disclosures, FT reported.
\”We would expect a meaningful part of that [forbearance] hopefully not to be needed anymore,\” Brendan Coughlin, head of consumer lending at Citizens Bank, told the newspaper.
He said 7 percent of small business and consumer loans had forbearance agreements at the end of March. Ten percent of Citizens' clients who've their paychecks paid in to the bank's current accounts and took the instalments holidays saw their income disrupted because the pandemic began, Coughlin added.
Among the 10 percent includes people whose incomes were supplanted with jobless benefits, he explained.
In accessory for state unemployment benefits, let go workers received an extra $600 per week in the federal CARES Act, which expires in July.
In Citizens' mortgage business, about A quarter of those who applied for forbearance continued to create loan repayments, FT reported.
\”We will attempt to have conversations with those customers around the pros and cons,\” Coughlin told the paper. \”If they really don't need it, it may really be better to allow them to return to a payment scheme and start paying down their interest so that they don't have to push everything to no more the loan.\”
The fact that the amount of customers who applied for forbearance were far lower than those expected also made bank executives more optimistic about repayment.
Synchrony recently said 75 percent of their customers who initially took payment holidays have previously resumed payments. American Express told FT that it is likely to close its forbearance program because demand from customers has dramatically slowed, the newspaper reported.
In addition, Bank of America, Wells Fargo and US Bank have revealed as many as 40 percent of those who were granted forbearance continued paying.
\”The most fascinating thing to me continues to be that many people that asked for and received forbearance have continued to create their scheduled payments,\” Jason Goldberg, analyst at Barclays, told the newspaper. \”Still, many of these initiatives were designed for any V-shaped recovery. That's why it is important this reopening continues and the employment picture improves quickly. \”
