Mortgage forbearance rate continued to decline in July

Loans entering forbearance is about the same as loans exiting forbearance for Fannie Mae, Freddie Mac and Ginne Mae loans: MBA

Servicers’ forbearance portfolio volume descended in July since mortgage forbearance rate dropped below 1% in April.

The total number of loans decreased one basis point to 0.34%, according to Mortgage Bankers Association (MBA). The mortgage forbearance rate on a declining trend is positive news after the economic impacts of the pandemic hit borrowers hard.

The largest decline in July came from portfolio loans and private-label securities (PLS), which dropped 34 bps to 1.34% of the servicers’ total portfolio volume. 

Fannie Mae and Freddie Mac loans in forbearance fell by one bps to 0.34%. Ginnie Mae loans remained the same to the previous month at 1.26% from June. 

“There has been very little change in the forbearance rate for Fannie Mae, Freddie Mac, and Ginnie Mae loans during the past three months, perhaps indicating that we have reached a floor, with loans entering forbearance about equal to loans exiting forbearance for these loan types,” said Marina Walsh, vice president of industry analysis at the trade group. 

As of July 31, 370,000 homeowners are in forbearance plans, down from 405,000 at the end of June.

What will servicing look like in 2022?

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.

Presented by: Selene Finance

Exits represented 0.14% of servicing portfolio volume in July and new forbearance requests represented 0.11%. The survey showed 30.46% of total loans were in the initial plan stage last month and 56.1% were in a forbearance extension. The remaining 13.43% represented re-entries. 

From June 2020 to July 2022, MBA data found that 29.5% of exits resulted in a loan deferral or partial claim, while 18.5% of borrowers continued to pay during the forbearance period. However, about 17.2% were borrowers who did not make their monthly payments and did not have a loss mitigation plan.

The survey also shows loans serviced, not delinquent or in foreclosure, dropped to 95.59% in July, from 95.71% in June at a time of high inflation and volatility in mortgage rates. 

Idaho had the highest share of loans that were current as a percent of servicing portfolio, followed by Washington, Colorado, Utah and Oregon.

We’re covering this important topic at our HousingWire Annual event Oct. 3-5. Register here to join us in Scottsdale, Arizona

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