“Payment deferrals were a lifeline for millions during Covid. What happens when those end?”
That’s the headline from a recent NBC News story about the millions of Americans who have deferred payment on mortgages, rent, student loans and utility bills.
The story notes: “But as more people are vaccinated and the country sees a return to normal life on the horizon, payments on trillions of dollars of those debts could resume soon, even if debtors remain out of work or in financial distress because of the economic crisis the outbreak wrought.”
The story quotes David Silberman, who was the CFPB’s associate director for research, markets and regulation from its inception through February 2020, as saying: “These periods of forbearance will eventually end. And when they do, there could be millions of families unable to resume paying mortgages, car payments, credit cards, student loans, who could be at risk of losing their homes, their cars, having their wages and bank accounts garnished, who will struggle to put food on the table and take care of their families.”
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26% of Consumers Have a Third-Party Collection Tradeline on Their Credit Report.
That’s one of the items insideARM pulled from the CFPB’s 2020 Report to Congress. insideARM also noted this from the 55-page report: “From January 1, 2020, through December 31, 2020, the CFPB received approximately 82,700 debt collection complaints, which increased roughly 10 percent compared to 2019.
The most common complaint from consumers (49% of all complaints) was that they were being pursued by a debt collector for a debt they do not owe; the second-highest group of consumer complaints (20%) related to written notifications about the debt. Complaints regarding threatening someone or sharing information improperly were the least complained about debt collection issue in 2020.”
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“U.S. Jobless Claims Reach Lowest Level of the Pandemic.”
That’s the good news from The Wall Street Journal which quotes Julia Pollak, Labor Economist at jobs site ZipRecruiter, as saying: “The recovery is really hitting full steam again, and all of the conditions will be in place for a real, explosive liftoff in the summer when hopefully we’ve reached a higher vaccination threshold.” It isn’t all sunshine and roses, though.
The WSJ notes: “Millions of people are suffering from spells of long-term unemployment. Total continuing claims, a proxy for the number of people receiving benefits, rose to 19 million in the week ended March 6, from 18.2 million a week earlier.”
On the bright side: “Household savings totaled $3.9 trillion in January, up from $1.4 trillion in February 2020, before the pandemic hit the U.S. economy. A third round of stimulus checks recently started showing up in households’ bank accounts, leaving many Americans with more cash to spend.”
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U.S. Household Net Worth Surged in Closing Months of 2020 . . . But So Did Household Debt.
These are some of the findings in a report recently released by the Federal Reserve, as reported in Bloomberg.
The report found that household net worth increased by $6.9 trillion, or 5.6%, to $130.2 trillion in the fourth quarter. But household debt increased at an annual rate of 6.5%, the fastest in 13 years. Bloomberg notes: “Federal debt outstanding increased $628 billion, or an annualized 10.9%, to $23.6 trillion,” without counting the recently signed $1.9 trillion stimulus bill.
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Higher Mortgage Rates.
While there are many ways to measure inflation, one indicator is to simply watch mortgage interest rates. At the end of March, Forbes reported “The average rate on a 30-year fixed-rate mortgage jumped 8 basis points this week to 3.17%, pushing higher for the sixth straight week as we enter the spring homebuying season.
Rates are on track to exceed experts’ 2021 predictions, which pinned rates to the low 3% range. But if this upward trend continues, rates could hit the higher end of the 3% range by mid-year.”
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The Big Question: Is Inflation Coming?
Although mortgage interest rates are easing upwards, as noted above, the inflation question remains a mystery. At least for now, the answer seems to be not to expect inflation. Forbes provides an analysis of why even after a third round of stimulus, adding $1.9 trillion in debt, the much-forecasted return of inflation probably won’t be seen, at least in the near term.
The article also notes why inflation is so hard to predict: “Inflation is a function of every nut and bolt inside the incredibly complex and intertwined economy. There are so many moving parts that even policymakers—with their army of PhD economists and MIT math heads—are terrible at predicting it.”
Ray Peloso, President and CEO of Katabat, brings 25 years of diverse consumer lending experience to Katabat, having held executive leadership roles at Royal Bank of Scotland, Capital One, Citibank, and MBNA. Ray’s prior expertise in consumer credit and lending underpins a clear vision and understanding of the challenges faced by Katabat’s clients in today’s rapidly evolving digital economy.
Ray Peloso, Chief Customer Officer at Finvi, brings 25 years of diverse consumer lending experience, having held executive leadership roles at Royal Bank of Scotland, Capital One, Citibank, MBNA and Katabat. Ray’s prior expertise in consumer credit and lending underpins a clear vision and understanding of the challenges faced by our clients in today’s rapidly evolving digital economy.
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