The forbearance rate of mortgages backed by Fannie Mae and Freddie Mac dropped to a three-month low of 5.64%, while the overall rate fell to 7.8%, the lowest in more than two months, the Mortgage Bankers Association said in a report on Monday.
The forbearance rate for mortgages backed by the government-sponsored enterprises, or GSEs, fell 43 basis points as of July 12 from the prior week, the biggest decline since MBA started tracking it. The rate for all mortgages fell 38 basis points from 8.18%, the report said.
“This is the biggest improvement in the data since the crisis began,” said Jaret Seiberg, managing director of Cowen Washington Research Group. “The trajectory is for continued improvement.”
The forbearance rate for loans in Ginnie Mae securities – meaning, mortgages backed by the Federal Housing Administration, the Veterans Administration, and the U.S. Department of Agriculture – fell 30 basis points to 10.26%. The forbearance share for private-label mortgages that aren’t backed by the government decreased 52 basis points to 10.41%, the report said.
New requests from borrowers for permission to suspend their mortgage payments, measured as a share of serving portfolios, was flat with the prior week at 0.13%, said Mike Fratantoni, MBA’s chief economist.
A spike in new COVID-19 infections, primarily in southern states, may change that, he said. In addition, the $600 a week enhancement to unemployment benefits aimed at fully replacing the salaries of people who lost jobs because of the pandemic is slated to expire within weeks, and the Senate is just beginning to consider an extension approved by the House of Representatives in May.
“The pace of new forbearance requests remains quite low compared to earlier in the crisis, but we are watching carefully for any increases due to either the pick-up in COVID-19 cases or the cessation of enhanced unemployment insurance benefits at the end of this month,” Fratantoni said.
There’s been a pick-up in calls to mortgage servicers from borrowers, the MBA report said. Measured as a percent of servicing portfolio volume, calls increased to 8.3% from 7.8% while the average call length grew to 7.6 minutes from 7.4 minutes.