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Share of Loans in Forbearance Drops by 14 Basis Points

The latest Forbearance and Call Volume Survey from the Mortgage Bankers Association (MBA) has found that the total number of loans now in forbearance fell by 14 basis points from 3.40% of servicers' portfolio volume in the prior week to 3.26% as of August 8, 2021. The MBA estimates that approximately 1.6 million homeowners are currently in forbearance plans.

The share of GSE loans (Fannie Mae and Freddie Mac) in forbearance decreased five basis points from 1.74% to 1.69%. Ginnie Mae loans in forbearance plummeted 23 basis points from 4.18% to 3.95%, while the forbearance share for portfolio loans and private-label securities (PLS) decreased 32 basis points from 7.37% to 7.05%. The percentage of loans in forbearance for independent mortgage bank (IMB) servicers decreased 17 basis points to 3.46%, and the percentage of loans in forbearance for depository servicers decreased 13 basis points to 3.36%.

"The largest decrease in a month in the share of loans in forbearance came from a jump in forbearance exits, as many homeowners are nearing the end of their forbearance terms. The forbearance share declined for all investor and servicer categories," said Mike Fratantoni, MBA's SVP and Chief Economist. "New forbearance requests picked up slightly this week, particularly for Ginnie Mae loans, but overall trends remain positive. Incoming data continues to support our forecast of an improving job market in the months ahead.”

By stage, 9.7% of total loans in forbearance were in their initial forbearance plan stage, while 82.8% were in a forbearance extension, and the remaining 7.5% were forbearance re-entries.

A sign of more homeowners exiting their plans was found in the rise of more returning to the workforce, as the U.S. Department of Labor reported that for the week ending August 7, the advance figure for seasonally-adjusted initial claims was 375,000, a decrease of 12,000 from the previous week's revised level. The previous week's level was revised up by 2,000 from 385,000 to 387,000. The four-week moving average was 396,250, an increase of 1,750 from the previous week's revised average.

The Bureau of Labor Statistics (BLS) for July 2021 reported total non-farm payroll employment rising by 943,000 in July, and the unemployment rate declining by 0.5 percentage point to 5.4%, with job gains seen in leisure and hospitality, local government education, and in professional and business services.

“Overall, job gains were again concentrated in the service-providing segment of the economy; in particular, the leisure and hospitality sector alone added 380,000 jobs in July, a welcome sign as the re-opening of the economy continues,” said Doug Duncan, Fannie Mae Chief Economist. “Other notable job gains occurred in the education and health services (87,000), professional and business services (60,000), and transportation and warehousing sectors (49,700). We do note, however, that July’s job gains are likely somewhat overstated due to an abnormal seasonal pattern of hiring in the education sector. As in previous months’ reports, we saw outsized job growth across the state, local, and private education sectors, which collectively gained 271,000 jobs in July.”

Of the cumulative forbearance exits for the period from June 1, 2020, through August 8, 2021:

  • 28.2% resulted in a loan deferral/partial claim.
  • 22.7% represented borrowers who continued to make their monthly payments during their forbearance period.
  • 16.1% represented borrowers who did not make all of their monthly payments and exited forbearance without a loss mitigation plan in place yet.
  • 13.2% resulted in reinstatements, in which past-due amounts are paid back when exiting forbearance.
  • 11.0% 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.
  • The remaining 1.4% resulted in repayment plans, short sales, deed-in-lieus or other reasons.

In terms of weekly servicer call center volume, calls increased relative to the prior week, from 6.8% to 7.5% as more required assistance and “next steps” to exiting their forbearance plans.

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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