Loans in forbearance flat ahead of CFPB regulations

MBA expects "a sharp increase in forbearance exits over the next month"

The number of loans in forbearance stood unchanged from last week at 3.25% for the week ending on Aug. 22.

According to the latest report from the Mortgage Bankers Association, 1.6 million homeowners are in forbearance plans.

The share of Fannie Mae and Freddie Mac loans in forbearance remained the same, at 1.66%. The share of Ginnie Mae loans with paused payments also saw no change at 3.92%, but the share of portfolio loans and private-label securities in forbearance increased slightly from 7.15% to 7.18%.

The share of independent mortgage bank loans in forbearance rose 2 basis points to 3.50%, and for depository servicers, the share of loans in forbearance held steady at 3.35%.

Mortgage servicers are bracing for a dramatic uptick in forbearance exits in September and October. Nearly 750,000 active forbearance plans will expire in the next two months, per a report by Black Knight.

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“The share of loans in forbearance changed little once again this week, as both new requests and exits remained at a slow pace,” said Mike Fratantoni, MBA’s chief economist. “We expect a sharp increase in forbearance exits over the next month as many borrowers reach the 18-month mark and see their forbearance plans end. For those borrowers who have exited in August, the majority either enter deferral plans or obtain modifications.”

There was a relative lull in calls to mortgage servicers this week. As a percent of servicing portfolio volume, calls decreased from 7.3% to 6.3%, and those calling in were answered within 1.2 minutes, down from 1.5 minutes the week prior. Abandonment rates also decreased from 4.6% to 3.8%, and the average call length was up slightly from 7.9 minutes to 8.0 minutes.

The MBA’s weekly report represents about three quarters of the first-mortgage servicing market, or 36.9 million loans.

Along with planning for an increase in forbearance exits, mortgage servicers are preparing to navigate new regulations from the Consumer Financial Protection Bureau.

The new regulations, which take effect August 31, are intended to provide additional procedural safeguards for borrowers, in part by further clarifying the process to initiate a foreclosure. Servicers can skip some of the new requirements if a borrower was already six months past-due by March 2020 or if the property is abandoned.

The CFPB regulations also allows borrowers to include escrow shortages in loss mitigation. The regulations also limit how much servicers can require borrowers to deposit in an escrow account during the next year.

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