Servicers’ forbearance rate declined in August, excepting for Ginnie Mae loans, the Mortgage Bankers Association (MBA) reported Monday. The trade group expects pressure in the coming months if the unemployment rate increases.
The total number of loans in forbearance decreased two basis points from the previous month to 0.72% of the servicers’ total portfolio volume in August, positive news after the economic impacts of the pandemic hit borrowers hard.
As of Aug. 31, 360,000 homeowners were in forbearance plans, down from 370,000 at the end of July.
The most significant decline in August came from portfolio loans and private-label securities (PLS), which dropped eight bps from the previous month to 1.26% of the servicers’ total portfolio volume. Fannie Mae and Freddie Mac loans in forbearance fell by two bps to 0.32%.
Meanwhile, the report shows that Ginnie Mae loans in forbearance increased from 1.26% of the total portfolio in July to 1.32% in August.
“Last month, Ginnie Mae new forbearance requests and re-entries outpaced forbearance exits, and there was a decline in post-forbearance workout performance among government loans,” Marina Walsh, vice president of industry analysis at the trade group, said in a statement. “Despite this activity, the overall performance of the Ginnie Mae portfolio still improved to 94.57% current.”
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.
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Exits represented 0.15% of servicing portfolio volume in August and new forbearance requests represented 0.13%. The survey showed that 32.1% of total loans were in the initial plan stage last month and 54.4% were in a forbearance extension. The remaining 13.5% represented re-entries.
From June 2020 to August 2022, MBA data found that 29.6% of exits resulted in a loan deferral or partial claim, while 18.4% of borrowers continued to pay during the forbearance period. However, about 17.3% were borrowers who did not make their monthly payments and did not have a loss mitigation plan.
The survey also shows that loans serviced, not delinquent or in foreclosure, increased to 95.85% in August, from 95.59% in July at a time of high inflation and volatility in mortgage rates.
“There may be pressures on portfolio performance and post-forbearance workout performance in the months ahead – particularly for government loans – if the record-low unemployment rate rises and the personal savings rate decreases amidst high inflation,” Walsh said.