More borrowers are getting forbearance modifications

The total number of loans in forbearance decreased to 2.06% as of Oct. 31, shows MBA

Forbearance predictably declined across the board last week as exits accelerated, but more borrowers are going into plan modifications because they are still struggling to recover their pre-pandemic income.

The total number of loans in forbearance decreased by nine basis points to 2.06% as of Oct. 31, according to the latest report from the Mortgage Bankers Association (MBA). In the previous week, the rate dropped six basis points to 2.15%.

Just over one million homeowners are still in forbearance plans. The survey included data on 36.6 million loans serviced as of Oct. 31, 73% of the first-mortgage servicing market. This is the last MBA’s weekly survey, as the trade group is moving to a monthly report.

Fannie Mae and Freddie Mac loans in forbearance declined five basis points to 0.92%. Meanwhile, Ginnie Mae loans decreased by 13 bps to 2.52%

The most notable decline was in the independent mortgage bank portfolio, which dipped 15 basis points to 2.28%. The share of private-label securities (PLS) loans in forbearance fell 13 basis points to 5%. For depository servicers, the percentage declined 5 bps to 2.02%.

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According to Mike Fratantoni, the MBA’s senior vice-president and chief economist, more borrowers exiting plans in the last week of October went into modification, “a sign that they have not yet regained their pre-pandemic level of income.”

“The strong job market report from October, with another drop in the unemployment rate and a pickup in wage growth, is a positive sign for homeowners still struggling to get back on their feet,” he added.

The survey shows that 15.8% of total loans in forbearance were in the initial stage last week, and 73.9% were in a forbearance extension. The remaining 10.3% were re-entries.

Weekly call volume for servicers was up, from 5.9% of the servicing portfolio volume the week prior to 6.5%.

During the last 15 months, MBA’s data revealed that 29.1% of exits resulted in a loan deferral or partial claim. Also, 20.4% represented borrowers who continued to pay during the forbearance period.

However, 16.7% were borrowers who did not make their monthly payments and did not have a loss mitigation plan. In addition, 13.4% resulted in a loan modification or a trial loan modification, compared to 13.1% in the previous week.

Total requests were at 0.04% of servicing portfolio volume, while exits represented 0.17% of the total – in the previous week, the share was 0.09%, the report said.

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