Fewer homeowners paused or reduced their mortgage payments in May, continuing the decline from April when the total number of loans in forbearance fell to a level below 1% of servicers’ portfolio volume.
The share of loans in forbearance dropped by 9 basis points to 0.85% in May from April’s 0.94%, according to the Mortgage Bankers Association (MBA).
The largest decline came from the portfolio loans and private-label securities (PLS) category, declining 29 basis points to 1.86%. Ginnie Mae loans in forbearance fell 4 basis points to 1.25% of the servicers’ total portfolio volume. Fannie Mae and Freddie Mac loans dropped 5 basis points to 0.38%.
At the end of May, 425,000 homeowners were in forbearance plans.
The pace of monthly forbearance exits in May reached a new survey low since June 2020, when the association first started tracking exits.
“Most borrowers exiting forbearance are moving into either a loan modification, payment deferral, or a combination of the two workout options,” said Marina Walsh, vice president of industry analysis at the MBA.
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Exits represented 0.19% of servicing portfolio volume in May and total forbearance requests represented 0.1%. The survey shows 28.2% of total loans in forbearance were in the initial plan stage last month and 58.6% were in a forbearance extension. The remaining 13.2% represented forbearance re-entries.
During the past 22 months, 29.4% of exits resulted in a loan deferral or partial claim, the MBA data shows. Less than 19% of borrowers continued to make their monthly payments during their forbearance period. About 17% of borrowers did not make their monthly payments and exited forbearance without a loss mitigation plan.
The overall servicing portfolio performance that is not delinquent or in foreclosure, posted 95.85% in May, 21 basis points higher than April’s 95.64%.
While it’s a positive sign to see improvement in shares of loans serviced, Walsh said it is worth monitoring if the rapid increase in interest rates for all loans “complicates post-forbearance workout options and puts additional pressure on borrowers in existing post-forbearance workouts.”