Lower earnings and higher loan charge-offs by the fourth quarter and into 2021.

Some economists this month have been warning that recent improvements in the economy, including job gains and an exuberant housing market, are masking some underlying realities that will cause further drops late this year.

For credit unions, CUNA predicted those trends will lead to lower earnings and higher loan charge-offs by the fourth quarter and into 2021.

The pandemic recession is leading Americans along diverging paths: Those with high incomes have tended to experience fewer and shorter layoffs, while many low-income workers are seeing temporary furloughs morph into extended unemployment even as the extra $600-a-week federal unemployment assistance expired at the end of July, the analysts said.

During the first three months of the COVID-19 pandemic, nearly 11 million households fell behind on their rent or mortgage payments and 30 million individuals missed at least one student loan payment, according research released Sept. 17 by the Mortgage Bankers Association of Washington, D.C.

The MBA found that 11% (5.9 million) of renters reported a missed, delayed or reduced payment, while 8% (5.1 million) of homeowners missed or deferred at least one mortgage payment. Minority groups were the most likely to miss rent, mortgage and student debt payments.

However, federal government stimulus programs and employees being called back to work appear to have helped most individuals make their housing payments, according to Gary V. Engelhardt, a Syracuse University economist and one of the researchers for the MBA report.

“Families’ continued ability to meet their housing obligations during the ongoing pandemic is critical to the health of the housing and mortgage industries,” Engelhardt said.

“The stubbornly high rates of new COVID-19 cases and the labor market’s sluggish recovery both present significant challenges for household finances as the country enters the fall. Particularly for renters, the combination of those who missed a payment — or were offered and did not take it — is substantive enough to suggest real risk to their ability to make upcoming payments.”

The report followed the same set of households from before the outbreak through the end of June. The MBA said it plans to release data from the third quarter later this fall.

Economist Joseph Mayans said the economy bounced back faster than expected in May and June with the $1,200 stimulus checks, enhanced unemployment and businesses starting to reopen in some states “quicker than many economists were expecting.”

But even though about 10 million jobs were recovered since April, the nation still has 10 million fewer jobs than before the pandemic, and growth is slowing, Mayans said during a Sept. 15 consumer credit webinar sponsored by Experian.

“That’s not sustainable,” Mayans said. “You can’t have that many people out of work and expect the recovery to continue.”

He continues, “The recovery is in a precarious position. We’ve lost that stimulus and there are a lot of unknowns.”

Mayans said the major reason housing is doing so well in the recession is because of a “K-shaped” recovery with fortunes rising for high-wage workers and falling for lower-income workers.

Low-wage earners have felt the brunt of job losses and are struggling to pay bills, while high-income workers are seizing the opportunity to move or refinance with historically low interest rates.

At the same time, prices have continued to rise, providing homeowners more equity and reducing the risk of foreclosure. He said he expects housing to remain strong at least through the fall.

Gavin Harding, a senior business consultant for Experian, said the prevalence of high-income borrowers is caused both by job trends that keep more of them in the market and lender standards that are keeping out many lower-income buyers.

“The hurdles to get those good deals are dramatically increasing,” Harding said. “You’re going to need equity, you’re going to need cash down, and a very, very good credit score.”

Experian’s data showed that buyers with Super Prime credit scores (780-850) accounted for nearly half of originations in August, and their volume rose 35% from a year earlier.

Prime borrowers (661-779) accounted for nearly as many originations, but their volume fell 14% from a year earlier. Everyone else accounted for less than 5% of deals and all fell precipitously. Near prime (601-660) deals fell 47% and the drops for subprime (600 or less) exceeded 60%.

U.S. first-mortgage originations in the three months ending June 30 were $928 billion, up 85.2% from 2019′s second quarter. Purchase mortgage originations were $348 billion, down 2%, while refinances grew four-fold to $580 billion.

At credit unions, first-mortgage originations were $79.4 billion in the three months ending June 30, up 94.4% from 2019’s second quarter. The gains were relatively uniform across regions. By comparison, non-real estate loan originations rose only 1.3%.

First-mortgage balances were $10.88 trillion as of June 30 among all U.S. lenders, up 4.1% from a year earlier. At credit unions, first-mortgage balances grew 13.7% to $507.1 billion as of June 30.

The MBA, which forecast originations will continue climbing into next year, has continued pushing back its forecast for a decline.

On March 6, five days before the World Health Organization declared COVID-19 a pandemic, the MBA forecast mortgage originations would start to drop in this year’s fourth quarter. Its Sept. 18 forecast showed the drop isn’t expected until 2021’s second quarter.

Its forecast for total originations for 2020 have improved from a 7% drop in December’s forecast, to a 20% gain in March’s forecast and a 45% gain in the Sept. 18 forecast. It now expects 2020 purchase mortgages to rise 10% and refinances to nearly double, it said.