U.S. bank disclosures about loan payment deferrals have quickly turned from unequivocally frightening to somewhat comforting in that they are not as bad as they might have been.

But as with recent employment figures, the end game remains unclear. The process of bringing back workers could be derailed by new surges in COVID-19 infections. Meanwhile, more borrowers may need to skip payments if federal cash infusions run out without another relief package. The extent of the damage will depend on how many borrowers are just temporarily out of work because of the pandemic, and how many face long-term unemployment.

Ultimately, analysts and lenders expect that many customers will recover with the help of forbearance. Forbearance measures are traditionally deployed in situations like natural disasters to give borrowers relief from temporary distress, and range from payment holidays to fee waivers and, in the case of commercial borrowers, financial performance covenants.

But other borrowers will not make it, and could take banks down with them, experts said. That could mean banks are forced to sell to stronger institutions, or worse.

"Banks are going to fail because of this," said Paul Noring, who leads Berkeley Research Group's financial institution advisory practice.

The amount of loans that have received forbearance so far certainly appears large enough to cause substantial wreckage. Many institutions reported that 10% to 20% of balances in their portfolios have been granted pandemic-related accommodations. The figures for commercial real estate are particularly high, with landlords hit by shuttered storefronts and restaurants. Consumer portfolios are also imperiled. Bank of America Corp. said that about 8% of the balances in its consumer and small-business credit card segment had been granted payment deferrals as of April 27.

Nationally, forbearance rates for home mortgages appear to be flattening out at around 9% of loans. If that holds, the toll would be significantly less than anticipated by some high-profile forecasts for mortgage forbearance levels of 12% early in the crisis.On the other hand, many loans are collateralized, many customers enrolled in relief programs have already started making payments again, and ultimate losses are anyone's guess this early in the cycle. Banks have generally reported that forbearance levels have increased since initial disclosures in April earnings reports, but that new borrower requests for help have tapered off dramatically. BofA said in June that about 45% of credit card clients who asked for deferrals never missed payments in the first place and that the same is true for 20% of mortgage borrowers, echoing other lenders that have chalked up substantial numbers of deferral requests to precautionary moves by customers shaken by the economy's free fall in March and April.

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For now, many businesses and households are awash in federal pandemic relief payments. Personal income surged 11% from March to April as a 90% spike in direct government transfers, mostly reflecting relief checks and expanded unemployment insurance, more than offset an 8% decline in employee compensation. With the collapse in spending and a jump in the savings rate to 33%, many households are building a cushion that could help them make loan payments in the coming months.

Still, if Federal Reserve policymakers are correct that the country will finish the year at an unemployment rate of 9.3%, and that unemployment will remain well above pre-pandemic levels through 2022, many borrowers who were financially healthy before the recession will be struggling for years to come. Wells Fargo & Co. has said that it is transferring staff from credit origination to loan workout assignments as it gears up for defaults and permanent modifications. "We anticipate greater collection activity, greater call volume, greater modification and working through individual credit situations with borrowers," CFO John Shrewsberry said at a conference in June.

Noring said that forbearance has "worked extremely well in natural disasters," when healthy regional economies have been able to snap back from one-time hits. But in cases like Hurricane Katrina, where the devastating storm in 2005 was followed relatively quickly by the financial crisis, the results were more mixed.

"In those cases, which might also be the case here, yes, it helped certain borrowers who were able to get back on their feet, but it also simply delayed the inevitable for others that were not able to get started during the forbearance period," he said.

Even higher-income households with mortgages might have trouble recovering well-paid employment.

"It's not a three-month problem, it's a six- to nine-month problem," said Anu Shultes, CEO of LendUp Global Inc., a fintech that offers small-dollar consumer loans.

Shultes also worries about "the long-tail impact of forbearance" on customers flagged as having received disaster assistance on credit reports, and how that will affect their future loan applications.

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Because of uncertainty about which borrowers will be able to bounce back, there is a strong rationale for widespread relief. "You need this time in order to let the dust settle and see who's where," Noring said. "In good times prudence, in bad times patience."

Lenders are also using temporary forbearance to wait until there is greater clarity about business conditions, particularly because of the risk posed by new spikes in infections. Michael Jacobson, a partner at Katten Muchin Rosenman LLP who represents lenders and investors in commercial finance transactions, said his clients have been wary of "negotiating into darkness," and taken a "wait and see" approach.

Lenders are generally not interested in owning their borrowers' operations and want to work with clients, Jacobson said. But many permanent accommodations, where lenders seek to secure more collateral, and tighter financial reporting requirements and controls on distributions and new investors, are on hold until there is greater visibility.

"People have to be very careful in negotiating their long-term strategies," Jacobson said. "I think we're going to be kicking the can for the next couple months."

Federal Deposit Insurance Corp. Chairman Jelena McWilliams credited regulatory guidance encouraging banks to work with borrowers and allow them to skip payments with helping to "stabilize the economy," and said on June 16 that the guidance would "remain in place for the foreseeable future." She noted that the recession and its impacts "will take a few quarters to fully play out."

Mark Ruddock, CEO of small business lender BFS Financial, said his company talked to all its borrowers as it approved a wave of payment deferrals in late March and early April.

"We needed to create a situation where our customers felt they could make it to the other side, even if that crossing looked extremely difficult," he said. Some may not survive, but others are adapting, and Ruddock ultimately expects that a recovery will be followed by an "acceleration phase" during which "resilient businesses that make it across will be very actively looking for capital again, and seeking to fund their growth and reawakening."

"Hopefully, by the time this is all said and done, this will end up looking like a nasty adjustment like we saw in 2008, but hopefully not much worse than that," Ruddock said.