Pace of Loans Entering Forbearance Slows

Close to 9% of all active mortgage loans are in forbearance as of this week, according to the latest data from Black Knight’s McDash Flash. That amounts to a total of 4.7 million homeowners now in forbearance, which is up from 4.5 million loans reported one week ago.

The latest numbers have been enhanced to include loans that were in forbearance but not previously reported as “COVID-19-related.”

About 7% of mortgage loans backed by Fannie Mae and Freddie Mac are now in forbearance, while 12.4% of FHA and VA-backed loans are in forbearance. Just over 9% of portfolio and privately securitized loans are also in forbearance.

In terms of loan numbers, that’s 27.9 million GSE loans, 12.1 million FHA and VA loans, and 13 million other mortgage loans.

In total dollar amount across all loan types, the total unpaid principal balance on loans in forbearance is $1 trillion.

Meanwhile, servicers must continue to advance principal and interest payments along with tax and insurance payments on behalf of these loans.

Servicers are on the hook for $3.6 billion per month in payments for government-backed loans in forbearance along with $1.5 billion in taxes and insurance each month.

On top of that, mortgage servicers will miss out on $2.1 billion from portfolio loans and privately securitized loans.

Black Knight noted that the Federal Housing Finance Agency will cap principal and insurance payments at four months for loans backed by the GSEs. However, this still amounts to $8.8 billion in advances to cover GSE loans currently in forbearance.

Perhaps a slight breath of relief for servicers might come from the fact that the pace of loans entering forbearance appears to be on a downward trend, according to Black Knight’s data.

Over the past week, about 26,000 loans entered forbearance each day. This is 85% fewer loans per day than recorded in early April.

Looking forward, Black Knight estimates there would be 4.9 million loans in forbearance by the end of this month if the number of loans entering forbearance declines by 10% per day moving forward. By the end of June, there would be 5 million loans in forbearance, accounting for 9.4% of all active mortgages in this scenario.

Under a “more pessimistic scenario” with the two-week average going forward and a 10% decline beginning in mid-June, 5.4 million loans would be in forbearance at the end of this month, according to Black Knight’s calculations. This would account for 10.1% of all active mortgage loans.

By the end of June, 6.3 million loans could be in forbearance under this scenario, accounting for close to 12% of all mortgage loans.