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How Federal Actions Helped Keep Americans in Their Homes

The Housing Finance Policy Center has released Housing Finance at a Glance: A Monthly Chartbook, February 2021, which includes updated figures detailing origination volume, the share of loans in serious delinquency or foreclosure, spreads on GSE risk transfer securities, and a special feature on loan-level GSE credit data. 

Among the highlights of the report, it was noted that the Biden Administration’s  extension of the mortgage forbearance period for federally-backed mortgages has helped more than 300,000 Americans during the time of the pandemic. The extension was for borrowers who entered into forbearance plans prior to June 30, 2020 may now be in forbearance for up to 15 months, and new borrowers can enter forbearance as late as June 30, 2021. 

“Since reaching a peak of 6.4% in May 2020, the GSE forbearance rate has fallen to 3.0% in February 2021,” the report found. “About two-thirds of the GSE loans that have been in forbearance have exited the program. Very few of those that have exited are still delinquent or in loss mitigation. A larger share of those that have exited forbearance prepaid their mortgage (14% of GSE loans ever in forbearance). The majority of those that have exited forbearance are current, accounting for 47of all GSE loans ever in forbearance, with most of these320,856 borrowers—enrolled in the COVID-19 Payment Deferral Program as of January 2021; this accounts for 1.4of all GSE loans.” 

Servicers are working with borrowers nationwide to help repay the forborne amount. One of these options put forth by Fannie Mae and Freddie Mac is the COVID-19 Deferral Program. A mortgage modification will be considered for borrowers who cannot make their old payment, which would further reduce their payment. 

Although borrowers with the highest score account for half of the COVID-19 Payment Deferral program’s participants, the program has helped homeowners with lower FICO scores. The typical deferred amount while in forbearance is small, $6,000, accounting for 2.1% of the implied home value at originationaccording to the report. 

The Chartbook also took a deeper dive into the banner year that was 2020 for first-lien originations, with $4.04 trillion in mortgages originated in 2020, This number exceeds 2003’s volume of $3.73 trillion, the previous record holder, by $315 billion. 

In terms of breakdown, the share of portfolio originations was 21.5in 2020, a substantial decline from 35.9% the previous year. The 2020 GSE share was up significantly at 59.2%, compared to 42.9in 2019. The FHA/VA share at the end of 2020 was 18.4%, down 1% compared to 2019. The share of private-label securities (PLS) was 0.9% in 2020, down from 1.9% in 2019, and a fraction of its share in the prebubble years. 

The smaller share of portfolio and PLS in 2020 reflects the impact of COVID-19, which made it difficult to originate mortgages without government support,” the report found. “The higher GSE share reflects the large amount of refinances done through this channel. With private capital pulling back significantly because of the economic downturn, the federal government is once again playing the dominant role in the mortgage market. 

Click here to view “Housing Finance at a Glance: A Monthly Chartbook, February 2021.” 

About Author: Eric C. Peck

Eric C. Peck has 20-plus years’ experience covering the mortgage industry, he most recently served as Editor-in-Chief for The Mortgage Press and National Mortgage Professional Magazine. Peck graduated from the New York Institute of Technology where he received his B.A. in Communication Arts/Media. After graduating, he began his professional career with Videography Magazine before landing in the mortgage space. Peck has edited three published books and has served as Copy Editor for Entrepreneur.com.
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