Servicers’ forbearance portfolio volume trended downward in June but declined at a much slower pace than earlier this year, according to the Mortgage Bankers Association (MBA).
The total number of loans in forbearance decreased by 4 basis points to 0.81% of servicers’ portfolio volume in June from May, per data from the MBA. The rate has steadily declined this year, dropping below 1% in April, with fewer than half a million borrowers remaining with an active plan as of June.
The largest decline in June came from portfolio loans and private-label securities (PLS), which dropped 18 bps to 1.69% of the servicers’ total portfolio volume. Fannie Mae and Freddie Mac loans in forbearance decreased 4 bps to 0.35%. Ginnie Mae loans in forbearance rose 1 bps to 1.26% in June from May.
“Borrowers continue to exit forbearance, but at a much slower pace than six or nine months ago,” said Marina Walsh, vice president of industry analysis at the trade group. “New forbearance requests are still trickling in, as permitted under the CARES Act, resulting in very little movement in the overall percentage of loans in forbearance.”
At the end of June, 405,000 homeowners were in forbearance plans.
Exits represented 0.18% of servicing portfolio volume in June and total forbearance requests represented 0.11%. The survey showed 29.8% of total loans were in the initial plan stage last month and 57.6% were in a forbearance extension. The remaining 12.6% represented re-entries.
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The mortgage forbearance rate on a declining trend is positive news after the economic impacts of the pandemic hit borrowers hard. But there are some early indicators of borrower stress resulting from high inflation and rising interest rates, added Walsh.
“For example, overall servicing portfolio performance dropped by 14 bps to 95.7% current in June, and the performance of post-forbearance workouts declined by 140 bps to 81.3%,” Walsh said. “It is worth monitoring post-forbearance workouts for all borrowers, and particularly for borrowers with government loans, who are typically the most vulnerable to economic slowdowns.”
From June 2020 to June 2022, MBA data revealed that 29.4% of exits resulted in a loan deferral or partial claim, while almost 19% of borrowers continued to pay during the forbearance period. However, about 17% 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 95.7% in June, from 95.9% in May at a time of high inflation and volatility in mortgage rates.