The share of loans in forbearance fell six basis points during the final week of March to 4.9% of servicers’ portfolio volume, according to recent data from the Mortgage Bankers Association. New forbearance requests also dropped to their lowest level since March, 2020 as forbearance volume fell across the board for every investor type.
Fannie Mae and Freddie Mac once again claimed the smallest share of loans in forbearance at 2.72% – a five bps improvement. Ginnie Mae loans in forbearance also dropped five bps to 6.78%, while the forbearance share for portfolio loans and private-label securities (PLS) decreased by 10 basis points to 8.8%.
However, according to MBA’s estimate, 2.5 million homeowners are still in some form of forbearance plan as of March 28.
“More than 21 percent of borrowers in forbearance extensions have now exceeded the 12-month mark,” said Mike Fratantoni, MBA’s senior vice president and chief economist. “Of those that exited forbearance in March, more than 21 percent received a modification, indicating that their income had declined and they could not afford their original mortgage payment.”
Of the cumulative forbearance exits for the period from June 1, 2020, through March 28, 2021, 26.6% represented borrowers who continued to make their monthly payments during their forbearance period. However, that number has slowly decreased for months now. On the other end of the spectrum, the number of borrowers who did not make all of their monthly payments and exited forbearance without a loss mitigation plan in place, neared 15% during the last week of March.
To accommodate the large volume of loans still in forbearance, mortgage servicers must have functional, flexible and effective processes in place. Here are some actionable steps to create that process.
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The Consumer Financial Protection Bureau is keeping a close eye on borrowers who have stayed in forbearance the longest, fearing that these homeowners are the closest to a foreclosure cliff. On Monday, the CFPB released a notice of proposed rulemaking that would amend Regulation X to provide a special pre-foreclosure review period prohibiting servicers from starting foreclosures until after December 31, 2021.
After eight straight months of declines, the national mortgage delinquency rate rose to 6% in February from 5.85% the prior month, according to Black Knight data. This group of property owners was the subject of the CFPB’s recent rulemaking; the agency said it intends to prompt servicers to help seriously delinquent borrowers transition smoothly out of forbearance and into loss mitigation.
How many people will actually exit forbearance by the end of 2021 is difficult to predict, though Black Knight estimated another 686,000 plans are currently set to expire in April, meaning servicers will continue to be extremely busy through the spring. At the current, rate the data giant said continued extensions will result in a building volume of expiration activity come June.
Logan Mohtashami, HousingWire’s lead analyst, believes the next wave of job growth could even lead to the eventual end of forbearance, sooner than expected.
“Even if a homeowner is in a forbearance program, they can make their mortgage payment once they return to employment or even some form of income close to when they purchased the home,” Mohtashami said. “We can expect a lag between the improving jobs data and numbers falling in the forbearance programs. Many households need dual incomes to afford the mortgage payment. Those households will need to wait until both homeowners gain full employment before they are comfortable in getting out of the forbearance program.”
Another important factor, Mohtashami noted, is that that many of the people who are still unemployed and getting government disaster relief dollars are renters while homeowners are sitting on top of some of the highest levels of equity in history.