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Mortgage forbearance rate ticks up to 5.49%

The number of borrowers who exited without a loss mitigation plan in place has risen for five weeks, MBA data shows

The U.S. forbearance rate measuring the share of mortgages with suspended payments increased for the second time in nearly six months from 5.48% to 5.49%, according to the Mortgage Bankers Association.

According to Mike Fratantoni, MBA’s senior vice president and chief economist, more borrowers are seeking relief as restrictions on businesses and rising COVID-19 cases are triggering layoffs and slowing economic activity.

“The share of loans in forbearance has stayed fairly level since early November, often with small decreases in the GSE loan share and increases for Ginnie Mae loans. That was the case last week,” said Fratantoni.

Ginnie Mae loans in particular, which include loans backed by the Federal Housing Administration, led last week’s increase after gaining 11 basis points to 7.79%. In fact, forbearance requests from Ginnie Mae borrowers reached the highest level since the week ending June 14, the MBA said.

Fannie Mae and Freddie Mac loans in forbearance decreased to 3.25% – a 1-basis-point improvement, though not as steep as the 8-basis-point decline the week prior.

The Three Cs of Post-Forbearance

Here is how to help with questions that so many homeowners will be asking soon.

Presented by: Freddie Mac

For nearly five months, the U.S. forbearance rate had either fallen or remained flat since forbearances decreased for the first time in the series history on June 22. However, Nov. 23 saw a 1-basis-point uptick, and though Dec. 14 recorded a six-basis-point improvement, forbearances have now regained those points and then some.

The FHA announced on Monday borrowers now have even longer to request deferred payments after extending the deadline for initial forbearance requests for FHA-backed mortgages to Feb. 28, 2021. With the six-month grace period, plus a possible six-month extension, some FHA borrowers may be in forbearance into Feb. 2022.

And borrowers are proving they are still taking advantage of the relief. According to the report, 18.78% of total loans in forbearance are in the initial forbearance plan stage – up from 18.72% the week prior.

The remaining loans in forbearance were made up of 78.54% in some form of extension, and 2.69% forbearance re-entries.

The MBA has noted that borrowers need to contact their servicers for access to options. However, for the fifth week in a row, the number of borrowers who did not make all of their monthly payments and exited forbearance without a loss mitigation plan in place rose to 13.2% from 13.1% the week prior. That number encompasses those who have exited forbearance from the period of June 1 through Dec. 6.

Of the cumulative forbearance exits for the same time period, 29.8% were borrowers who continued to make their monthly payments during their forbearance period. That number is down from 30.1% reported in the week prior.

Recent data from Urban Institute scholars predicts the now 2.7 million homeowners who remain in forbearance are likely to end up in worse financial shape than the 3.5 million who exited forbearance earlier.

“Households that are still in forbearance, not making payments, and scheduled to come out of forbearance next year will need additional support,” the Urban scholars said. “About 23% of households in forbearance said they did not know whether they will have to make an increased monthly payment or a lump-sum payment to their mortgage servicer once forbearance ends. Fifty-four percent said they have no or slight confidence that they will be able to resume monthly payments when forbearance ends.”

While the FHA has extended forbearance policies in to the new year, the FHFA has yet to announce whether it will continue to buy mortgages in forbearance past its fast approaching deadline of Dec. 31, 2020.

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