Forbearance exits are speeding up

It's the 19th straight week of forbearance decreases

Servicers’ forbearance portfolio volume dropped yet again, this time falling 11 basis points to 3.76% in the period ending July 4, according to a survey from the Mortgage Bankers Association. 

It’s the 19th straight week of forbearance decreases. The MBA estimates that 1.9 million homeowners are currently in forbearance plans.

The share of Fannie Mae and Freddie Mac loans in forbearance decreased eight basis points to 1.91%, and Ginnie Mae loans decreased a staggering 32 basis points to 4.78%. The forbearance share for portfolio loans and private-label securities (PLS) increased two basis points to 7.94%.

It’s only the second time since March that both Fannie Mae and Freddie Mac loans in forbearance were reported under 2%, with last week’s 1.99% being the first.

MBA Senior Vice President and Chief Economist Mike Fratantoni noted that forbearance exits increased to the fastest pace since early April, while the mortgage delinquency rate across the entire servicing portfolio declined in June compared to May.

How proactive communication can reduce the risk of foreclosure

As borrowers impacted by COVID-19 continue to exit mortgage forbearance, now is the time for lenders and servicers to be proactive in their borrower outreach to reduce foreclosure volume.

Presented by: Computershare Loan Services

“However, the delinquency rate slightly increased for homeowners who have completed a workout,” Fratantoni said. “Borrowers who are exiting forbearance now are likely to have been in relief for over a year, with almost 60% of borrowers in forbearance extensions of longer than 12 months. These borrowers may face more challenges getting back to making regular payments.”

Recently, the White House said in a statement that three federal agencies that back mortgages — the United States Department of Agriculture (USDA), the Department of Veterans Affairs (VA) and the Department of Housing and Urban Development (HUD)  — would extend the pandemic-related foreclosure ban until July 31. The Federal Housing Finance Agency, which oversees Fannie and Freddie, said it will similarly extend its limit through the end of July. This latest extension will be the last one, per the Biden Administration.

By stage, 10.8% of total loans in forbearance are in the initial plan stage, while 82.7% are in a forbearance extension — down from 82.9% last week. The remaining 6.5% are re-entries.

Of the cumulative exits for the period from June 1, 2020, through July 4, 2021, over a quarter (27.8%) resulted in loan deferrals or partial claims. Another 23.5% represented borrowers who continued to make their monthly payments during their forbearance period.

Roughly 15.5% represented borrowers who did not make all of their monthly payments and exited forbearance without a loss mitigation plan in place. About 11% resulted in a loan modification or trial loan modification.

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