Forbearance Portfolio Volume Slides for 21st Straight Month

According to the latest Loan Monitoring Survey from the Mortgage Bankers Association (MBA), the total number of loans now in forbearance continues to drop, falling 12 basis points month-over-month, from 1.30% down to 1.18% of servicers’ portfolio volume as of February 28, 2022.

The MBA estimates that approximately 590,000 homeowners remain in forbearance plans.

“There were many positive results in overall mortgage performance in February,” said Marina Walsh, CMB, MBA’s VP of Industry Analysis. “The percentage of borrowers in forbearance declined for the 21st consecutive month, and the percentage of borrowers current on their mortgage payments increased to almost 95%–350 basis points higher than one year ago. Finally, the percentage of borrowers with existing loan workouts who were current on their mortgage payments improved for the first time since June 2021.”

By loan type, the share of Fannie Mae and Freddie Mac (GSE) loans in forbearance decreased eight basis points from 0.64% to 0.56%, while Ginnie Mae loans in forbearance decreased 10 basis points from 1.60% to 1.50%, and the forbearance share for portfolio loans and private-label securities (PLS) declined 30 basis points, from 3.02% to 2.72%.

By stage, 30.1% of total loans in forbearance were in the initial forbearance plan stage, while 57% were in a forbearance extension. The remaining 12.9% were comprised of forbearance re-entries, including re-entries with extensions.

“These three results–the lower forbearance rates and higher performance rates for both total borrowers and borrowers in workouts–are especially favorable given that there is typically a dip in mortgage performance in February because of the shortened number of days to make a payment,” said Walsh. “We can credit several factors to the improved performance, including the availability of viable loss mitigation options, low unemployment that is now below 4%, strong wage growth, and rising home equity.”

As mentioned by Walsh, strong employment numbers continue to factor into the increase in forbearance exits, as the U.S. Department of Labor (DOL) reported that, for the week ending March 12, the advance figure for seasonally adjusted initial unemployment claims was 214,000, a decrease of 15,000 from the previous week's revised level. The advance seasonally adjusted insured unemployment rate fell to 1% percent for the week ending March 5, a decrease of 0.1 percentage point from the previous week's unrevised rate. The advance number for seasonally adjusted insured unemployment during the week ending March 5 was 1,419,000, a decrease of 71,000 from the previous week's revised level—marking the lowest level for insured unemployment since February 21, 1970 when it was 1,412,000.

In terms of home equity, Black Knight’s latest Mortgage Monitor Report 2021's record-breaking $4.4 trillion in mortgage originations and the distinct shift to an equity-driven refinance market.

According to Black Knight, though American homeowners are tapping their homes' equity via cash-out refinances at the highest level since 2005, they are doing so judiciously, at roughly half the rate seen back then.

In terms of home equity, Black Knight’s latest Mortgage Monitor Report found that in 2021, American homeowners were tapping their homes' equity via cash-out refinances at the highest level since 2005, but are doing so judiciously, at roughly half the rate seen back then.

“In the end, total originations came in at $4.4 trillion, actually outpacing the prior record,” said Black Knight Data & Analytics President Ben Graboske of the Report. “At $1.7 trillion for the year, purchase lending also hit the highest point ever recorded, while the $2.7 trillion in refinance lending was a bit below 2020 levels. What stands out is the 20% growth in cash-outs over 2021, which accounted for $1.2 trillion in originations last year and $275 billion in equity withdrawn. In Q4 alone, homeowners tapped $80 billion–the most in 15 years–while marking the fifth consecutive quarter of more than one million borrowers pulling cash out. And yet, despite that sizable withdrawal, surging home values meant overall tappable equity still grew by nearly $450 billion in the quarter.”

Of the cumulative forbearance exits for the period from June 1, 2020, through February 28, 2022, at the time of forbearance exit:

• 29.2% resulted in a loan deferral/partial claim.
• 19.1% represented borrowers who continued to make their monthly payments during their forbearance period.
• 17.0% represented borrowers who did not make all their monthly payments and exited forbearance without a loss mitigation plan in place yet.
• 15.2% resulted in a loan modification or trial loan modification.
• 11.5% resulted in reinstatements, in which past-due amounts are paid back when exiting forbearance.
• 6.8% resulted in loans paid off through either a refinance or by selling the home.
• The remaining 1.2% resulted in repayment plans, short sales, deed-in-lieus or other reasons.

Regionally, the five states with the highest share of loans that were current as a percent of servicing portfolio included:

• Idaho
• Washington
• Colorado
• Utah
• Oregon

Conversely, the five states with the lowest share of loans that were current as a percent of servicing portfolio included:

• Louisiana
• Mississippi
• New York
• Indiana
• Oklahoma