As of May 7, nearly 4.1 million homeowners are in forbearance plans, representing 7.7% of all active mortgages, according to the latest forbearance data from Black Knight.
They account for $890 billion in unpaid principal and includes 6.4% of all GSE-backed loans and 11% of all FHA/VA loans. At today’s level, mortgage servicers need to advance a combined $4.5 billion/month to holders of government-backed mortgage securities on COVID-19-related forbearances. Another $2.1 billion in lost funds will be faced each month by those with portfolio-held or privately securitized mortgages (some 7.2% of these loans are in forbearance as well).
Reminder: FHFA has said that P&I advance payments will be capped at four months for servicers of GSE-backed mortgages. Given today’s number of loans in forbearance, servicers of GSE-backed loans face $8 billion in advances over that four-month period. There is no such cap on the additional $800 million in monthly T&I advances.
According to Black Knight CEO Anthony Jabbour, the recent Federal Housing Finance Agency (FHFA) announcement of a four-month limit on advance obligations for servicers of mortgages backed by Fannie Mae and Freddie Mac provides the industry with some much-needed clarity.
“Having a four-month end date on the period in which servicers need to advance principal and interest payments on behalf of homeowners in forbearance is extremely helpful to our servicing clients,” said Jabbour. “Still, even knowing that time limit, with today’s number of forbearance plans, servicers are still looking at more than $7 billion dollars in advances over those four months. And the forbearance numbers are climbing steadily, day by day. Clearly, this remains a challenging situation all around.”
With dramatic increases in unemployment, delinquencies and defaults can be expected to increase for the foreseeable future, even during forbearance, Black Knight notes.
“From the start of the COVID-19 crisis, Black Knight has sought to provide leadership on behalf of our clients, as well as provide them with clarity, actionable intelligence and knowledgeable assistance,” Jabbour added. “Beyond that, no other company has the sort of holistic view of the mortgage market and related industries that Black Knight has. We’ve been able to see – and quantify – what this situation means for our clients, the industry and the wider U.S. economy, and we have been actively sharing and innovating around that insight.”