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Mortgage

Forbearance rate declines again, but the pressure’s coming

In the near-term, the number of loans in forbearance will likely increase also due to the devastation caused by Hurricane Ian

Servicers’ forbearance rate declined marginally again in September, the Mortgage Bankers Association (MBA) reported Monday. But the trade group expects pressure in the coming months due to the worsening economic conditions and the destruction caused by Hurricane Ian. 

The total number of loans in forbearance decreased three basis points from the previous month to 0.69% of the servicers’ total portfolio volume in September. As of Sep. 30, 345,000 homeowners were in forbearance plans, down from 360,000 at the end of August. 

The most significant decline in September came from portfolio loans and private-label securities (PLS), which dropped 12 bps from the previous month to 1.14% of the servicers’ total portfolio volume. Fannie Mae and Freddie Mac loans in forbearance fell by two bps to 0.30%. Meanwhile, the report shows that Ginnie Mae loans in forbearance increased one basis point to 1.33% in September.

“The pace of forbearance exits slowed to a new survey low and new forbearance requests continued to come in. This dynamic in turn prevented any substantial improvement in the forbearance rate,”  Marina Walsh, vice president of industry analysis at the trade group, said in a statement. 

With the COVID-19 federal health emergency still in effect, borrowers can still seek initial COVID-19 hardship forbearance, according to Walsh. They can also get a forbearance plan due to natural disasters. 

“In the near-term, the number of loans in forbearance will likely increase for another reason – the recent devastation caused by Hurricane Ian in Florida, South Carolina, and other states,” Walsh said. 

In September, exits represented 0.13% of servicing portfolio volume and new forbearance requests represented 0.10%. The survey showed that 33.7% of total loans were in the initial plan stage last month and 53.2% were in a forbearance extension. The remaining 13.3% represented re-entries.  

From June 2020 to September 2022, MBA data found that 29.6% of exits resulted in a loan deferral or partial claim, while 18.3% of borrowers continued to pay during the forbearance period. However, about 17.3% were borrowers who did not make their monthly payments and did not have a loss mitigation plan.

The survey also shows that loans serviced, not delinquent or in foreclosure, fell to 95.83% in September, from 95.85% in August.  

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