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Forbearance Volume Dips With Uptick in Job Market

The Mortgage Bankers Association (MBA) is reporting that this week, the total share of loans in forbearance has decreased two basis points, down to 4.16% of overall volume from last week’s total of 4.18%. According to the latest Forbearance and Call Volume Survey, approximately 2.1 million U.S. homeowners remain in forbearance plans.

“The share of loans in forbearance declined for the 14th straight week, with small drops across most investor types and all servicer types,” said Mike Fratantoni, MBA’s SVP and Chief Economist. “Forbearance exits dropped to six basis points, the lowest weekly level since mid-February, but new forbearance requests, at four basis points, matched the recent weekly low from early May.”

Government-sponsored enterprise (GSE) loans in forbearance dropped across the board from the previous week, as the share of Fannie Mae and Freddie Mac loans in forbearance decreased one basis point to 2.18%, while Ginnie Mae loans in forbearance decreased one basis points to 5.54%.

The forbearance share for portfolio loans and private-label securities (PLS) decreased six basis points to 8.31%. The percentage of loans in forbearance for independent mortgage bank (IMB) servicers decreased two basis points to 4.34%, and the percentage of loans in forbearance for depository servicers decreased one basis point to 4.33%.

More Americans are re-entering the workforce, and in turn, exiting their forbearance plans. The Bureau of Labor Statistics (BLS) reported that the American economy added 559,000 jobs in the month of May, and the unemployment rate was 5.8%, down from 6.1% in April to its lowest point since the start of the pandemic in March 2020.

Further, the U.S. Department of Labor found that for the week ending May 29, seasonally adjusted initial unemployment claims was 385,000, a decrease of 20,000 from the previous week's level, and the lowest level for initial claims since March 14, 2020 when it was 256,000.

“Although the headline employment growth number for May was lower than many had anticipated, other data show evidence of a strengthening job market,” said Fratantoni. “That is good news for homeowners who have been struggling and are looking for work, as more families can regain their incomes and start making their mortgage payments again.”

By stage, 11.1% of total loans in forbearance were in their initial forbearance plan stage, while 83.2% were in a forbearance extension. The remaining 5.7% represented forbearance re-entries.

Of the cumulative forbearance exits for the period from June 1, 2020, through May 30, 2021:

  • 27.4% resulted in a loan deferral/partial claim.
  • 24.6% represented borrowers who continued to make their monthly payments during their forbearance period.
  • 15.0% represented borrowers who did not make all of their monthly payments and exited forbearance without a loss mitigation plan in place yet.
  • 14.0% resulted in reinstatements, in which past-due amounts are paid back when exiting forbearance.
  • 10.0% resulted in a loan modification or trial loan modification.
  • 7.5% resulted in loans paid off through either a refinance or by selling the home.
  • The remaining 1.5% resulted in repayment plans, short sales, deed-in-lieus or other reasons.

Servicer call center volume remained relatively the same the previous week at 6.5%, with the average speed to answer calls decreasing from 1.3 minutes to 1.2 minutes, while the average call length rose from 7.7 minutes to 7.8 minutes.

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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