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Mortgage

As exits slow, forbearance trickles down to 4.49%

2.25 million homeowners are still in some form of mortgage forbearance

The total number of servicers’ loans in forbearance has dropped for two months, however, forbearance portfolio volume fell just one basis point last week to an average of 4.49%, according to the Mortgage Bankers Association.

Last week’s drop paled in comparison to the 40 basis point decline the previous two weeks had seen, and was likely the result of some investor categories remaining unchanged from the week prior, while others fluctuated. For instance, the share of Fannie Mae and Freddie Mac loans in forbearance remained the same relative to the prior week at 2.44%, continuing to make up the smallest share of investor portfolios.

Ginnie Mae loans in forbearance decreased seven basis points to 6.09%, while the forbearance share for portfolio loans and private-label securities (PLS) increased by eight basis points to 8.42%. As servicers continued to buy out delinquent loans from the Ginnie Mae pools, those loans became reclassified as portfolio loans, which is beneficial in lowering Ginnie Mae’s forbearance share but naturally pushes the portfolio/PLS share upward.

Overall, last week saw an increase in the number of forbearance requests while the rate of exits slowed down. The MBA also reported that 40% of borrowers in forbearance extensions have now exceeded the 12-month mark. Borrowers in this population are likely in government-backed mortgages as both the FHA and FHFA have extended their forbearance blankets out to 18 months. Borrowers in other categories — portfolios, PLS’s, IMB’s and depository servicers — have different standards and non-standard expiration deadlines.

Of the cumulative forbearance exits for the period from June 1, 2020, through April 18, 2021, 25.4% represented borrowers who continued to make their monthly payments during their forbearance period. This number has been inversely dropping for months against a rising percentage of borrowers who did not make all of their monthly payments and exited forbearance without a loss mitigation plan in place yet.

However, as of last week, that number managed to dip two basis points to 14.4%. Instead, the number of loans that resulted in loan deferral/partial claim and loan modification or trial loan modification, inched upwards.

Within the last month, the percentage of borrowers exiting with a loan deferral/partial claim has climbed above borrowers who stayed current on their payments. That’s a big shift – since the MBA began tracking these numbers, up-to-date borrowers had previously always made up the greatest share of exits.

With an estimated 2.25 million homeowners left in some form of forbearance plan, the CFPB is already performing investigations of several mortgage servicers to ensure that they are doing right by their borrowers as they exit forbearance.

Specifically, the agency is examining how many and which borrowers are in forbearance, whether loan modifications will succeed in getting borrowers to repay, whether servicers have been obstructing or delaying forbearance requests or granting only partial relief, and whether some servicers have been discriminating against borrowers based on race or ethnicity, whether deliberately or inadvertently.

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