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Forbearance rate left unchanged as exits slow

Servicers buying Ginnie Mae loans continued to put upwards pressure on Portfolio/PLS forbearance share

The U.S. forbearance rate was flat again last week at 5.38%, as a rise in portfolio loan and private label security forbearances offset declines for government-backed and government-insured loans, according to a survey from the Mortgage Bankers Association on Monday.

Fannie Mae and Freddie Mac once again claimed the smallest forbearance rate at 3.1% – a 1-basis-point improvement, and the lowest share the MBA has recorded for the government-sponsored enterprises since the survey began.

Ginnie Mae loans in forbearance, which include loans backed by the Federal Housing Administration, also managed to decline by 10 basis points last week to 7.51%

However, a 22-basis-point jump in the forbearance rate of portfolio loans and private-label securities offset the declines of almost every other investor class. Overall, the share of portfolio and PLS loans in forbearance rose to 9.16% after a 26-basis-point gain the week prior.

As servicers continued to buy out delinquent loans from the Ginnie Mae pools those loans became reclassified as portfolio loans, which is beneficial in lowering Ginnie Mae’s forbearance share but inversely pushes the portfolio/PLS share upwards.

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Though the forbearance rate overall remained unaltered, Mike
Fratantoni, MBA’s senior vice president and chief economist, reported the rate of exits from forbearance was at the slowest pace since the MBA began tracking exit data last summer.

As of last week, the MBA reported there are still 2.7 million borrowers in some form of forbearance, with that number remaining unchanged for nearly three months.

“Overall, the forbearance numbers have been little changed over the past few months. Homeowners still in forbearance are likely facing ongoing challenges with lost jobs, lost income, and other impacts from the pandemic,” Fratantoni said.

With improvement rates and exits slowing, data analytics company Black Knight estimates there are only 860,000 forbearance plan expirations scheduled for January and February. That’s less than the industry saw in December alone, which Black Knight said could limit potential removal activity over the next 60 days.

Starting Nov. 2, the MBA began reporting the number of borrowers who continued to make their monthly payments during their forbearance period and have since exited. Since that date, the MBA has revealed that the number of up-to-date borrowers has consistently dropped.

“With weekly start volumes still hovering around 50K, the new Biden administration proposal to extend the application deadline for entering forbearance plans could benefit a significant number of homeowners,” Black Knight said in it’s monthly Mortgage Monitor report.

Based on December’s numbers, Black Knight reported there could be more than 2.5 million active forbearance plans remaining at the end of March 2021.

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