With nearly 4 million homeowners in some type of mortgage forbearance plan – representing 7.54% of all mortgages, delinquencies are set to eclipse the great recession which peaked at 10%.

According to a new report from UK-based forecasting firm Oxford Economics, 15% of homeowners will fall behind on their monthly mortgage payments in a ‘tidal wave’ of delinquencies.

Stimulus legislation signed by President Donald Trump allows any borrower with a federally-backed mortgage to request forbearance for up to 12 months, meaning the homeowner can skip or make reduced payments during that time.

Given the risk mortgage companies are facing right now, many lenders have imposed  more stringent requirements for loan applicants. “The uncertainty in the mortgage market has contributed to a significant tightening of lending standards that may persist even once a recovery is underway,” Oxford Economics wrote. –MarketWatch

An while the pace of requests for forbearance has slowed in recent weeks – however that could change. “Although the pace of forbearance requests slowed this week, call volume picked up — which could be a sign that more borrowers are calling in to check their options now that May due dates have arrived,” said Mortgage Bankers Association chief economist, Mike Fratantoni.

Keep in mind that Oxford Economics’ forecast is half of the potential mortgage bloodbath predicted by Moody’s chief economics, Mark Zandi, who said that as many as 30% of Americans with home loans – or around 15 million households, may stop paying if the US economy remains closed through the summer or beyond.

We assume that a large percentage of Americans refusing to return to pre-pandemic consumption habits would have similar effects.

“This is an unprecedented event,” said Susan Wachter, professor of real estate and finance at the Wharton School of the University of Pennsylvania in comments last month. She also points out another way the current crisis is different from the 2008 GFC: “The great financial crisis happened over a number of years. This is happening in a matter of months – a matter of weeks.”