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Mortgage

For the first time since April, forbearances fall below 3 million

Down nearly a quarter from the week prior, portfolio-held and private labeled security loans lead the decline

After a slight uptick the previous week, mortgages in active forbearance plummeted 18%, marking the first time since mid-April the total number of plans fell below 3 million, Black Knight said in a report on Friday.

As of Oct. 6, 2.97 million homeowners remain in COVID-19-related forbearance plans, representing $614 billion in unpaid principal.

According to the report, last week’s decline of 649,000 forbearance cases represented the largest single-week drop since the beginning of the pandemic.

In the week prior, portfolio-held and private labeled security loans were largely responsible for the slight increase, with forbearance share gaining to 7.3% for a total of 28,000 new loans in forbearance. However, last week those same loans led the record decline after falling nearly a quarter (-24%) from the week prior, boasting a 228,000 reduction.

The rate for home loans in Ginnie Mae securities, primarily mortgages backed by the Federal Housing Administration or the Veterans Administration, also fell by 208,000, to 9.4% from 11.2% of active forbearances.

The forbearance rate for mortgages backed by Fannie Mae and Freddie Mac also played a major roll in the decline with 213,000 less mortgages in GSE forbearances – falling from 4.7% to 4%.

As the first wave of active forbearances from April expire in the initial six-month term, the overall national forbearance rate fell to 5.6% from 6.8% the week prior.

Black Knight estimates the significant drop could signal the beginning of long-term improvement and expects continued forbearance reduction moving forward. According to the report, an additional 800,000 forbearance plans are slated to reach the end of their initial six-month term.

A recent delinquency report from Black Knight revealed that of 2.4 million homeowners previously recorded leaving forbearance, 1.8 million are currently performing, while another 363,000 have since paid off their mortgages in full.

Ben Graboske, data and analytics president at Black Knight said Americans now have the most equity available to them in history, however, 9% of those in forbearance have less than 10% equity in their homes.

“Just 54,000 loans at present represent significant risk – having left forbearance, are past due and not engaged in loss mitigation efforts. Seventy percent of those were already delinquent in February, before COVID became a factor,” Graboske said.

A recent study from the Urban Institute also found that nearly 400,000 mortgage borrowers are “needlessly delinquent” as a result of the COVID-19 pandemic who did not use available forbearance options.

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