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Report Reflects a ‘Troubling Slowdown’ for Forbearance Improvement

GSE loansThe percentage of mortgage loans in forbearance programs dipped by -3%, or 92,000 actual loans, for the week ending January 5, according to a weekly report from Black Knight. That is the largest weekly drop since early November, Black Knight researchers say, adding that the decline was driven by the large volume of quarterly forbearance plan expirations at the end of December, many of which were reaching the 9-month mark.

Despite the decline, Black Knight reported, "this week's numbers reflect a troubling slowdown in the rate of improvement."

"The 3% decline in the first week of January fell starkly short of the 9% we saw at the start of July, during the first quarterly wave of expirations," the researchers noted. "And it pales in comparison to the 18% reduction in the first week of October when plans began to reach 6-month expirations."

While the monthly rate of decline has varied over the past seven months due to fluctuations in scheduled expiration activity, the report showed the population improved by an average rate of -1% month-over-month over the past 30 days. That’s down from -7.5% monthly on average from June through November.

December marked the last significant wave of quarterly expirations before the first plans begin to reach their 12-month points at the end of March.

"As such, it’s likely we’ll see only modest improvement in overall forbearance volumes between now and then," Black Knight reported.

Overall, as of January 5, 5.2% of all mortgages (2.74 million) are in forbearance. Together, they represent $547 billion in unpaid principal.

All investor classes showed some improvement—FHA/VA forbearances fell 33,000 (-2.8%), a 32,000 decline among GSE-backed loans, a 27,000, or -3.9%, reduction of private-label securities or banks' portfolio loans.

About 3.3% of all GSE-backed loans and 9.3% of all FHA/VA loans are in forbearance plans. An additional 5.2% of loans in private-label securities or banks’ portfolios are also in forbearance.

Forbearance plan starts fell again this week, Black Knight reported, "with both new starts and total starts hitting their lowest levels since the early stages of the pandemic, and restarts at their lowest since early October."

The report showed the largest weekly volume of forbearance removals, 146,000, since early November.

Still, just 35% of loans in expiring plans were removed from forbearance in the first week of January as compared to more than 60% on average in the first week of each of the previous three months.

"This decline in removals appears to be the largest contributing factor to the slowing rate of improvement in active forbearance plans," Black Knight reported.

About Author: Christina Hughes Babb

Christina Hughes Babb is a reporter for DS News and MReport. A graduate of Southern Methodist University, she has been a reporter, editor, and publisher in the Dallas area for more than 15 years. During her 10 years at Advocate Media and Dallas Magazine, she published thousands of articles covering local politics, real estate, development, crime, the arts, entertainment, and human interest, among other topics. She has won two national Mayborn School of Journalism Ten Spurs awards for nonfiction, and has penned pieces for Texas Monthly, Salon.com, Dallas Observer, Edible, and the Dallas Morning News, among others.
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