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Job Growth Driving More Forbearance Exits

The latest Forbearance and Call Volume Survey from the Mortgage Bankers Association (MBA) has found the share of loans in forbearance has dropped four basis point to 3.87% for the week of June 27, 2021, from last week’s share of 3.91%. MBA’s latest estimate finds approximately 1.9 million U.S. homeowners currently in forbearance plans. This marked the 18th consecutive week of declines in the number of Americans in plans.

Also declining this week was the share of GSE loans in forbearance, as Fannie Mae and Freddie Mac loans in forbearance decreased three basis points to 1.99% from 2.02%. The share of Ginnie Mae loans in forbearance decreased relative to the prior week, from 5.13% to 5.10%.

The percentage of loans in forbearance for independent mortgage bank (IMB) servicers decreased three basis points from 4.03% to 4.00%, and the percentage of loans in forbearance for depository servicers declined three basis points from 4.14% to 4.11%. The share of other loans (e.g., portfolio and PLS loans) in forbearance decreased relative to the prior week, from 7.97% to 7.92%.

“For the first time since last March, the share of Fannie Mae and Freddie Mac loans in forbearance dropped below 2%,” said Mike Fratantoni, MBA’s SVP and Chief Economist. “The share in every investor type and almost every loan category dropped as well, bringing the number of homeowners in forbearance below two million. The rate of forbearance exits and new forbearance requests remained at low levels, but we expect the pace of exits to increase with reporting next week for the beginning of July.”

By stage, 10.8% of total loans in forbearance are in the initial forbearance plan stage, 82.9% are in a forbearance extension, while the remaining 6.3% represent forbearance re-entries.

A bright spot is the number of Americans returning to the workforce, as the Bureau of Labor Statistics (BLS) reported that the American economy added 850,000 jobs in the month of June. Last week, the U.S. Department of Labor reported that for the week ending June 26, the advance figure for seasonally adjusted initial unemployment claims was 364,000, a decrease of 51,000 from the previous week's revised level, marking the lowest level for initial claims since March 14, 2020 when it was 256,000.

“Strong job growth in June should provide a springboard for further improvements in the forbearance numbers over the next month,” said Fratantoni.

Of the cumulative forbearance exits for the period from June 1, 2020, through June 27, 2021:

  • 27.9% resulted in a loan deferral/partial claim.
  • 23.8% 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.
  • 13.7% resulted in reinstatements, in which past-due amounts are paid back when exiting forbearance.
  • 10.4% 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.

In terms of weekly servicer call center volume, calls decreased relative to the prior week, from 7.2% to 5.9%, with the average call length increasing from 7.6 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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