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Rate of Forbearance Exits Slows

The number of U.S. homeowners in forbearance plans continues to drop, as this week’s Forbearance and Call Volume Survey from the Mortgage Bankers Association (MBA) finds that the total number of loans now in forbearance decreased by two basis points from 3.93% of servicers' portfolio volume in the prior week to 3.91% as of June 20, 2021.

An estimated two million homeowners remain in forbearance plans.

"The share of loans in forbearance declined for the 17th straight week, with small declines across almost every loan category," said Mike Fratantoni, MBA's SVP and Chief Economist. "The rate of forbearance exits slowed—as has been typical in mid-month reports—but the pace of new forbearance requests remained at a very low level of four basis points."

In terms of loan categories, the share of Fannie Mae and Freddie Mac loans in forbearance decreased three basis points from 2.05% to 2.02%, as Ginnie Mae loans in forbearance decreased two basis points from 5.15% to 5.13%.

The forbearance share of portfolio loans and private-label securities (PLS) decreased one basis point to from 7.98% to 7.97%. The percentage of loans in forbearance for independent mortgage bank (IMB) servicers decreased two basis points from 4.05% to 4.03%, and the percentage of loans in forbearance for depository servicers declined two basis points from 4.16% to 4.14%.

By stage, 10.7% of total loans in forbearance were in the initial forbearance plan stage, while 83.1% were in a forbearance extension, and the remaining 6.2% were forbearance re-entries.

"The steady improvement in the aggregate forbearance numbers is heartening, as it is evidence that improving economic conditions are allowing more homeowners to get back on their feet,” said Fratantoni. “However, we continue to closely monitor the number of forbearance re-entries, reflecting borrowers who exited forbearance, but had to re-enter due to hardships. These re-entries accounted for 6.2% of loans in forbearance this week."

Of the cumulative forbearance exits for the period from June 1, 2020, through June 20, 2021:

  • 27.8% resulted in a loan deferral/partial claim.
  • 23.9% represented borrowers who continued to make their monthly payments during their forbearance period.
  • 15.2% represented borrowers who did not make all of their monthly payments and exited forbearance without a loss mitigation plan in place yet.
  • 13.8% resulted in reinstatements, in which past-due amounts are paid back when exiting forbearance.
  • 10.3% 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.
  • 1.5% resulted in repayment plans, short sales, deed-in-lieus or other reasons.

Servicer call center volume increased relative to the prior week, from 7.0% to 7.2%, with the average speed to answer increasing from 1.3 minutes to 1.5 minutes, and the average call length time declining from 7.8 minutes to 7.6 minutes.

Governmental measures continue to be enacted to protect homeowners, as on Monday, the Consumer Financial Protection Bureau (CFPB) finalized amendments for federal servicing regulations to reinforce the ongoing economic recovery as the federal foreclosure moratoria are phased out, protecting mortgage borrowers from unwelcome surprises as they exit forbearance plans.

“An unchecked wave of foreclosures would drain billions of dollars in wealth from the Black and Hispanic communities hardest hit by the pandemic and still recovering from the impact of the Great Recession just over a decade ago,” said CFPB Acting Director Dave Uejio. “An unchecked wave of foreclosures would also risk destabilizing the housing market for all consumers. We are giving homeowners the time and opportunity to make informed decisions about the best course of action for them and their families, whether that is seeking a loan modification or selling their home. And we are giving mortgage servicers the flexibility they need to serve homeowners with dignity, while managing an unprecedented volume of borrowers seeking assistance.”

The CFPB’s new rules will require servicers to further increase their efforts to help prevent avoidable foreclosures.

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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