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Forbearance Exits Heat Up

The latest Forbearance and Call Volume Survey from the Mortgage Bankers Association (MBA) revealed that the total number of loans now in forbearance dropped to 3.50%, decreasing 26 basis points from 3.76% of servicers' portfolio volume in the prior week. MBA estimates that 1.75 million homeowners are currently in forbearance plans.

The share of Fannie Mae and Freddie Mac (GSE) loans in forbearance decreased eight basis points from 1.91% to 1.83%. Ginnie Mae loans in forbearance decreased 42 basis points, from 4.78% to 4.36%., while the forbearance share for portfolio loans and private-label securities (PLS) decreased 61 basis points from 7.94% to 7.33%. The percentage of loans in forbearance for independent mortgage bank (IMB) servicers decreased 19 basis points to 3.68%, and the percentage of loans in forbearance for depository servicers decreased 36 basis points to 3.62%.

"Forbearance exits edged up again last week and new forbearance requests dropped to their lowest level since last March, leading to the largest weekly drop in the forbearance share since last October and the 20th consecutive week of declines," said Mike Fratantoni, MBA's SVP and Chief Economist. "The forbearance share decreased for every investor and servicer category."

By stage, 9.8% of total loans in forbearance were in the initial forbearance plan stage, while 83.4% were in a forbearance extension. The remaining 6.8% are forbearance re-entries.

"The latest economic data regarding the job market and consumer spending continue to show a robust pace of economic recovery, which is supporting further improvements in the forbearance numbers as more homeowners are able to resume their payments," said Fratantoni.

Signs of that economic recovery can be seen in the latest numbers from the U.S. Department of Labor, which found that for the week ending July 10, the advance figure for seasonally adjusted initial unemployment claims was 360,000, a decrease of 26,000 from the previous week's revised level, the lowest level for initial claims since March 14, 2020 when it was 256,000. Overall, in the month of June, the Bureau of Labor Statistics (BLS) reported that the American economy added 850,000 jobs.

Of the cumulative forbearance exits for the period from June 1, 2020 through July 11, 2021:

  • 28% resulted in a loan deferral/partial claim.
  • 23.2% represented borrowers who continued to make their monthly payments during their forbearance period.
  • 15.7% represented borrowers who did not make all of their monthly payments and exited forbearance without a loss mitigation plan in place yet.
  • 13.5% resulted in reinstatements, in which past-due amounts are paid back when exiting forbearance.
  • 10.7% resulted in a loan modification or trial loan modification.
  • 7.4% 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.

Weekly servicer call center volume decreased over the prior week, from 7.3% to 6.4%, with the average call length increasing slightly from 8.0 minutes to 8.1 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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