The statistics are concerning. In an effort to help people out due to massive unemployment, lenders of all types are making arrangements to delay payments on everything from auto loans to mortgages. Credit reporting agency TransUnion gives as a look at the numbers:
"About 3 million auto loans and 15 million credit card accounts are in some kind of program to let people skip or make partial payments. Those are probably low estimates."
According to the analytics company Black Knight, 4.75 million homeowners — or 9% of all mortgages — have entered into forbearance plans. Forbearance just delays the foreclosure process. Black Knight also reported that mortgage delinquencies surged by 1.6 million in April, the most significant single-month jump in history. Think back to the foreclosure numbers during the great recession in 2008. Even then, we didn't see the magnitude of people in financial stress as we are witnessing today.
Congress has passed protective measures to make sure that this doesn't harm credit scores. Congress has also passed hardship programs on government-backed mortgages, which make up about 50% of all mortgages. All of this helps in the short-term. It also creates three big questions. How long can the government prolong pain for the masses? How do you transition people back to individual responsibility? What is the fine print that the credit industry is going to enforce at some point?
Then you have the scenario of government bailouts on a massive scale, unlike anything you have seen since the Great Depression. It is tough to predict how this turns out with such an unprecedented event. What do you do if you are one of the recipients of credit aid?
It is really simple. Call your lenders and make sure you are very clear on the fine print. What you don't want to do is bury your head in the sand without a vision of how things get back to normal.