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Forbearance Exit Volume Continues to Grow

The share if U.S. homeowners in some stage of forbearance continues to dwindle nationwide, falling to 4.04% of all mortgage loans according to the latest Forbearance and Call Volume Survey from the Mortgage Bankers Association (MBA). This total is down from last week’s share when forbearances accounted for 4.16% of all mortgage volume. The MBA estimates that approximately two million homeowners are currently in forbearance plans.

The share of Fannie Mae and Freddie Mac loans in forbearance decreased nine basis points, from 2.18% to 2.09%. Ginnie Mae loans in forbearance decreased 32 basis points, from 5.54% to 5.22%, while the forbearance share for portfolio loans and private-label securities (PLS) increased two basis points from 8.31% to 8.33%. The percentage of loans in forbearance for independent mortgage bank (IMB) servicers decreased 13 basis points to 4.21%, and the percentage of loans in forbearance for depository servicers decreased 14 basis points to 4.19%.

"The share of loans in forbearance has now declined for 15 straight weeks, with a larger decline this week as many reached the 15-month mark," said Mike Fratantoni, SVP and Chief Economist for the MBA. "Forbearance exits increased—as is typical in the beginning of a month—and reached the fastest pace since April. New forbearance requests, at four basis points, remained at an extremely low level."

By stage, 10.6% of total loans in forbearance are in the initial forbearance plan stage, while 83.6% are in a forbearance extension. The remaining 5.8% are forbearance re-entries.

"We are seeing an increase in the share of forbearance exits, where borrowers do not have a loss mitigation plan in place,” said Fratantoni. “Homeowners who are reaching the end of their forbearance term need to contact their servicer to discuss the next steps in the process, as servicers cannot extend the forbearance term without talking to the borrower."

Of the cumulative forbearance exits for the period from June 1, 2020, through June 6, 2021:

  • 27.4% resulted in a loan deferral/partial claim.
  • 24.3% represented borrowers who continued to make their monthly payments during their forbearance period.
  • 15.3% represented borrowers who did not make all of their monthly payments and exited forbearance without a loss mitigation plan in place yet.
  • 13.9% resulted in reinstatements, in which past-due amounts are paid back when exiting forbearance.
  • 10.1% 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.

In terms of call center volume, the number of calls increased relative to the prior week, from 6.5% to 6.9%, with the average call time remaining the same at 7.8 minutes.

"The economy is recovering remarkably fast and as pandemic restrictions continue to lift, economic growth will remain strong over the coming months,” said Sam Khater, Freddie Mac’s Chief Economist, in a recent release.

And the job market continues to rise, with pandemic-stricken industries returning to the workforce. The U.S. Department of Labor has reported, for the week ending June 5, the advance figure for seasonally adjusted initial unemployment claims was 376,000, a decrease of 9,000 from the previous week's unrevised level of 385,000, marking the lowest level for initial claims since March 14, 2020 when it was 256,000.

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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