Forbearance Requests Slide to New Lows

One year into the pandemic, forbearance requests have dipped to their lowest levels since last March, as the Mortgage Bankers Association's (MBA) latest Forbearance and Call Volume Survey finds an estimated 2.5 million homeowners now in forbearance plans, with the total number of loans now in forbearance decreasing by nine basis points from 5.14% of servicers' portfolio volume in the prior week, to 5.05% as of March 14, 2021.

Of that 2.5 million, the share of Fannie Mae and Freddie Mac loans in forbearance decreased to 2.83%, a five-basis-point improvement. Ginnie Mae loans in forbearance decreased 13 basis points to 7.03%, while the forbearance share for portfolio loans and private-label securities (PLS) decreased by 14 basis points to 8.91%. The percentage of loans in forbearance for independent mortgage bank (IMB) servicers decreased eight basis points to 5.37%, and the percentage of loans in forbearance for depository servicers slid four basis points to 5.15%.

"New forbearance requests decreased to their lowest level since last March. Combined with a steady pace of exits, this drop in new requests resulted in a larger decline in the share of loans in forbearance across all investor categories," said Mike Fratantoni, MBA's Senior Vice President and Chief Economist. "More than 11% of borrowers in forbearance have now exceeded the 12-month mark. We anticipate that servicers will be busy over the next month, with many homeowners opting for the extension for up to 18 months recently made available for federally-backed loans."

By stage, 13.9% of total loans in forbearance are in the initial forbearance plan stage, while 83.5% are in a forbearance extension. The remaining 2.6% are forbearance re-entries.

According to the MBA, of the cumulative forbearance exits for the period from June 1, 2020-March 14, 2021:

• 27.1% represented borrowers who continued to make their monthly payments during their forbearance period.
• 26.2% resulted in a loan deferral/partial claim.
• 14.9% resulted in reinstatements, in which past-due amounts are paid back when exiting forbearance.
• 14.2% represented borrowers who did not make all of their monthly payments and exited forbearance without a loss mitigation plan in place yet.
• 8.2% resulted in a loan modification or trial loan modification.
• 7.6% resulted in loans paid off through either a refinance or by selling the home.
• The remaining 1.8% resulted in repayment plans, short sales, deed-in-lieus or other reasons.

With the Fed opting to keep rates in the 0% range, unemployment claims dropping by 42,000 last week, and portions of the $1.9 trillion American Rescue Plan economic stimulus package in play, signs point toward an uptick in economic health.

"The pace of economic activity is picking up, as the vaccine rollout continues,” said Fratantoni. “We expect that a stronger job market will help many successfully exit forbearance in the months ahead."