The U.S. forbearance rate declined for the second consecutive week, falling to the lowest level since mid-April, according to the Mortgage Bankers Association.
The share of mortgages with agreements to suspend payments fell to 7.2% from 7.21%, MBA said in a report on Monday. The forbearance rate for Fannie Mae and Freddie Mac loans dropped 1 basis point to 4.93%, while the rate for Ginnie Mae loans that include loans backed by the Federal Housing Administration was flat at 9.54%.
The decline comes even after the $600 a week beefed-up unemployment benefits that were part of the CARES Act expired on July 31. While President Donald Trump signed a directive on Aug. 8 that would pay $400 a week if states kicked in a quarter of that amount, it’s now been changed to $300 a week and only a handful of states have signed up.
“We remain surprised that forbearance rates are not climbing despite the expiration of enhanced unemployment benefits,” Jaret Seiberg, managing director of Cowen Washington Research Group said in a note to clients. “We are not sure how long this trend can continue.”
The number of Americans filing initial claims for jobless benefits rose above 1 million during the week ended Aug. 15, increasing for the first time since late July, as the COVID-19 pandemic fueled layoffs. The pandemic’s death toll topped 177,000 on Monday, according to data from Johns Hopkins University.
Calls from mortgage borrowers to the servicers handling their home loans have risen for four consecutive weeks, and exits from forbearance plans have slowed, according to the MBA report.
Measured as a percent of servicing portfolio, calls rose to 8.7% from 7.9% in the prior week, the MBA report said.
“The extremely high rate of initial claims for unemployment insurance and high level of unemployment remain a concern, and are indications of the challenges many households are facing,” said Mike Fratantoni, MBA’s chief economist.
“While new forbearance requests remain low, particularly for Fannie Mae and Freddie Mac loans, the pace of exits from forbearance has declined for two straight weeks,” he said.