Servicers’ forbearance portfolio volume continued to drop in January, but some borrowers exiting plans are still facing financial challenges.
The total number of loans in forbearance decreased by 11 basis points, from 1.41% in December to 1.30% in January, according to the Mortgage Bankers Association (MBA).
In total, about 650,000 homeowners were in forbearance plans as of January 31.
The most notable decline was in the portfolio loans and private-label securities (PLS) category, dipping by 41 basis points to 3.02%. Ginnie Mae loans in forbearance decreased three basis points to 1.60% of servicers’ portfolio volume. Meanwhile, Fannie Mae and Freddie Mac loans dropped by four basis points to 0.64%.
The survey included data on 36.4 million loans serviced as of January 31, 73% of the first-mortgage servicing market.
Marina Walsh, MBA’s vice president of industry analysis, said in a statement that the pace of forbearance exits reached a low since June 2020, when MBA began tracking the data. Also, there was a pick-up in new requests and re-entries, mainly for Ginnie Mae loans.
Communication, borrower education and training of consumer-facing staff are all critical elements to ensure your servicing operation is properly prepared to help borrowers as they exit forbearance plans.
Presented by: Selene Finance
Total forbearance requests increased three basis points to 0.18% of servicing portfolio volume in January, while exits decreased 11 bps to 0.28% of the total. The survey also shows that 26.8% of total loans were in the initial stage last month, and 59.5% were in a forbearance extension. The remaining 13.7% were re-entries
“Even though the forbearance rate continued its downward trajectory, it was the smallest monthly decline since January 2021,” Walsh said.
The survey also shows that loans serviced not delinquent or in foreclosure were 94.91% in January, up from 94.85% in December.
During the last 19 months, MBA’s data revealed that 29.1% of exits resulted in a loan deferral or partial claim. Also, 19.3% represented borrowers who continued to pay during the forbearance period. However, 17% were borrowers who did not make their monthly payments and did not have a loss mitigation plan.
According to Walsh, there was some deterioration in the performance of borrowers with existing loan workouts, which are solutions for restructuring debt, such as repayments, deferrals, or partial claims. Total loan workouts from 2020 that were current declined one basis point to 82.3% of the total workouts in servicing portfolio in January.
“Borrowers in loan workouts may have experienced new life events unrelated to the pandemic, or alternatively, the Omicron variant may have triggered or re-triggered employment, health, or other stresses,” Walsh said.