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Share of Forbearance Volume Cools to Near Halt

Week after week, the share of mortgage loans in forbearance have tailed off. This week, there was a near leveling off as the total number of loans now in forbearance decreased by one basis point from 3.48% of servicers' portfolio volume in the prior week to 3.47% as of July 25, 2021, according to the latest Forbearance and Call Volume Survey from the Mortgage Bankers Association (MBA).

The MBA estimates that approximately 1.74 million U.S. homeowners remain in forbearance plans.

The share of Fannie Mae and Freddie Mac (GSE) loans in forbearance this week decreased two basis points from 1.81% to 1.79%. Ginnie Mae loans in forbearance decreased five basis points from 4.35% to 4.30%, while the forbearance share for portfolio loans and private-label securities (PLS) increased six basis points from 7.38% to 7.44%. The percentage of loans in forbearance for independent mortgage bank (IMB) servicers decreased just one basis point to 3.67%, and the percentage of loans in forbearance for depository servicers decreased two basis points to 3.59%.

By stage, 10% of total loans in forbearance were in the initial forbearance plan stage, while 82.8% were in a forbearance extension. The remaining 7.2% represented forbearance re-entries.

"Forbearance exits remained low, and there was another increase in new forbearance requests, particularly for Ginnie Mae and portfolio and PLS loans. The net result was another slight decline in the share of loans in forbearance," said Mike Fratantoni, MBA's SVP and Chief Economist. "While the overall number of loans in forbearance has changed little in recent weeks, forbearance re-entries have increased, reaching 7.2% this week. Recent economic data continue to show improvement, but it's clear many homeowners in forbearance still need the relief that is being provided."

One sign of economic improvement was seen in recent findings by the U.S. Department of Labor. The insured unemployment rate stood at 2.4% for the week ending July 17, unchanged from the previous week's unrevised rate. For the week ending July 24, the advance figure for seasonally-adjusted initial unemployment claims stood at 400,000 nationwide, a decrease of 24,000 from the previous week's revised level. The previous week's level was revised up by 5,000 from 419,000 to 424,000.

Another indicator that the economy is picking up steam was found by the MBA’s Weekly Mortgage Applications Survey, which saw mortgage applications rebound over the previous week’s totals, increasing 5.7% week-over-week, spurred on by mortgage rates falling to their lowest since February 2021.

Of the cumulative forbearance exits for the period from June 1, 2020, through July 25, 2021:

  • 28.1% resulted in a loan deferral/partial claim.
  • 23.1% represented borrowers who continued to make their monthly payments during their forbearance period.
  • 15.6% represented borrowers who did not make all their monthly payments and exited forbearance without a loss mitigation plan in place yet.
  • 13.4% resulted in reinstatements, in which past-due amounts are paid back when exiting forbearance.
  • 10.8% 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 weekly servicer call center volume, the number of calls decreased relative to the previous week, dropping from 7.8% to 5.5%, with the average call length increasing slightly 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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