Mortgage forbearance numbers officially half of 2020’s peak

Just 2.1 million homeowners remain in some form of mortgage postponement

Mortgage forbearance exits picked up steam last week as the the total number of loans in forbearance dropped by 14 basis points to 4.22% of servicers’ portfolio share, according to the Mortgage Bankers Association‘s Forbearance and Call Volume Survey. With last week marking the 11th straight week of declines, the number of borrowers in forbearance is now at 2.1 million – officially less than half of the survey’s recorded high in June of 2020.

Because of robust exits, all investor types experienced some sort of decline alongside forbearance requests dropping four basis points to the lowest level since March. In particular, portfolio loans and private-label securities (PLS) dropped a massive 29 basis points to 8.26%.

The share of Fannie Mae and Freddie Mac loans in forbearance decreased eight basis points to 2.24%, while Ginnie Mae loans in forbearance decreased 21 basis points to 5.61%.

“The opening of the economy, as the successful vaccination effort continues, should lead to further reductions in the forbearance share,” said Mike Fratantoni, MBA’s senior vice president and chief economist. “However, many homeowners continue to struggle.”

By stage, only 11.9% of total loans in forbearance are in the initial mortgage forbearance plan stage, while 83% are now in some form of extension. Of those in forbearance extensions, more than half have been in forbearance for more than 12 months, Fratantoni noted. As for the remaining 5.1%, those borrowers are considered re-entries.

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As the remaining half of borrowers wade out their mortgage forbearance plans, the economic makeup of those exiting has shifted in recent months. A rising number of exits are resulting in loan deferral and partial claims ― 27.1% of all exits for the period from June 1, 2020, through May 9, 2021.

Less than a quarter represented borrowers who continued to make their monthly payments during
their mortgage forbearance period while 15% represented borrowers who did not make all of their monthly payments and exited forbearance without a loss mitigation plan in place.

While economic data reveals the nation is on the come up and the worst is behind Americans, there are concerns over the several million borrowers that are postponing their mortgage payments and the lackluster jobs report April saw.

April’s jobs numbers were so disappointing that the U.S. Chamber of Commerce, the nation’s largest lobbying group, even called for an end to the $300-a-week federal unemployment benefits, claiming that people being paid not to work were keeping consumers from returning to the labor force.

However, the the Bureau of Labor Statistics reported nearly eight million jobs are open for those seeking to reenter the market. The difficulty is getting the right people to find the right job while also keeping their roof over their head.

“I think over time, there’s gonna have to be an exit for forbearance, just like in time, by the end of September, unemployment benefits are going to go away,” said Logan Mohtashami, lead analyst for HousingWire. ” So we need to find some kind of closure but we’re also doing it in a way that Americans who can stay in their homes, who want to stay in their homes, are gonna be able to stay in their homes. 

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