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Forbearance declines at the fastest pace in a year

Loans in forbearance decreased by 27 basis points to 2.62%; Ginnie Mae portfolio, finally, is below 3%, shows MBA

Servicers’ forbearance portfolio volume declined at the fastest rate in a year, as mortgage holders exit COVID-19 plans, according to the Mortgage Bankers Association (MBA). Exits are expected to pick up the pace in the weeks ahead due to economic improvement.

The total number of loans in forbearance decreased by 27 basis points to 2.62% as of Oct. 3. In the previous week, the rate dropped seven basis points to 2.89%  

Last week, all categories showed declines. The most notable case was in the Ginnie Mae portfolio, dipping by 41 bps to 2.94% – for the first time, since the beginning of the pandemic, at a level below 3%. Meanwhile, Fannie Mae and Freddie Mac loans dropped by 17 basis points to 1.21%.

The loans and private-label securities (PLS) category showed a decline of 35 bps, to 6.42%. For depository servicers, the percentage declined 24 bps to 2.69%. The share of independent mortgage bank loans in forbearance fell 37 basis points to 2.82%.

Per the MBA’s estimate, 1.3 million homeowners are still in active forbearance plans. The survey included data on 36.5 million loans serviced as of Oct. 3, 73% of the first-mortgage servicing market.

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Presented by: Mr. Cooper

Mike Fratantoni, senior vice president and chief economist at the MBA, said in a statement that many borrowers reached the expiration of their forbearance term, and “the pace of exits climbed to the fastest pace in over a year.”

Despite a job growth weaker than expected in September, as a result of the Delta variant and supply chain challenges, Fratantoni expects that the drop in the unemployment rate, rising wages, and abundant job openings will continue to help borrowers exit forbearance successfully in the weeks ahead.

“Payment performance has remained steady for those who have exited forbearance and into a workout since 2020, with more than 85% of those borrowers current as of October,” he said.

During the last 15 months, MBA’s data revealed that 28.8% of exits resulted in a loan deferral or partial claim. Also, 21.3% represented borrowers who continued to pay during the forbearance period. However, 16.5% were borrowers who did not make their monthly payments and did not have a loss mitigation plan.

The survey shows that 13.3% of total loans in forbearance were in the initial stage last week, and 77.5% were in a forbearance extension. The remaining 9.2% were re-entries.

Total requests were at 0.05% of servicing portfolio volume, while exits represented 0.33% of the total – in the previous week, the share was 0,12%, the report said. Servicer call volume increased to 7.8% of the servicing portfolio volume last week, up from 5.9% the week prior.  

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