The forbearance rate for mortgages backed by Fannie Mae and Freddie Mac dropped to 4.94% in the first week of August, the first time it’s been below 5% since April, the Mortgage Bankers Association said in a report on Monday.
The rate for mortgages backed by government-sponsored enterprises, or GSEs, fell 25 basis points from the prior week, according to the report.
Overall, the forbearance rate fell 23 basis points from the prior week to 7.21%, representing 3.6 million mortgages, MBA said.
“Borrowers with conventional mortgages have been faring somewhat better throughout the current crisis, and there is no sign to date from these data that the risk to the GSEs is increasing,” said Mike Fratantoni, MBA’s chief economist.
The forbearance share for loans in Ginnie Mae securities – meaning, mortgages backed by the Federal Housing Administration, the Veterans Administration, and the U.S. Department of Agriculture – fell 52 basis points to 9.54%, though some of that decline stems from delinquent loans being sold off and reported in the private portfolio category, the report said.
“In a sign that more FHA and VA borrowers are struggling with a very tough job market, more Ginnie Mae borrowers requested than exited forbearance,” said Fratantoni.
The forbearance share for portfolio loans and private-label securities increased by 22 basis points to 10.34%, the report said.
Servicer call centers were busier, compared to the prior week, the report said. Calls from customers seeking forbearance, measured as a share of servicer portfolios, rose to 7.9% from 7.8%, though the average call length decreased to 7.5 minutes from 7.6 minutes.
Economists are watching to see what impact the July 31 expiration of the $600 a week enhanced unemployment benefits in the CARES Act will have on mortgage forbearance data. Jobless benefits typically only cover about 50% of a person’s former salary.
The House of Representatives passed a bill in May that would extend through January the $600 payments aimed at fully replacing prior salaries. The Senate proposed cutting those payments to $400 a week, and then went on its summer recess last week without debating or voting on the measure.
President Donald Trump signed a directive on Aug. 8 that would provide $400 a week to jobless Americans, using money set aside for the Federal Emergency Management Agency to cover costs related to disasters like hurricanes.
But, it requires states to retool systems to distribute the new benefit, which could take months, and it says states will have to cover a quarter of the cost of the payment. White House officials later walked that back, saying the federal government would pay $300 a week to jobless Americans without states kicking in the $100 a week cited in the directive Trump signed.