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Market Bracing for Wave of Forbearance Plan Expirations

During the last week of August the researchers at Black Knight recorded a decline in active forbearance plans to the tune of 53,000, a drop driven by a 23,000 decrease in forborne Federal Housing Administration loans—and those experts expect hundreds of thousands of plan exits in the coming month.

Among Freddie Mac and Fannie Mae-backed loans, active forbearances dipped by 20,000, and the number of forbearance plans among private-label security and portfolio mortgage loans declined by 10,000 from the week before.

Black Knight's McDash Flash forbearance tracker has been charting coronavirus-related forbearance activity since the onset of the pandemic, releasing Tuesday-Tuesday reports each Friday. As of August 31, Black Knight showed 1.71 million borrowers in forbearance plans.

Broken down by types of loans, 1.8% of government-sponsored enterprise loans are in forbearance; 5.6% of FHA/VA loans are in active forbearance, and 4% of portfolio and privately securitized mortgages are forborne.

Comparing month over month, plan volumes are down almost 9%. As Black Knight's authors put it, "all eyes are on September," as the market braces for a "large wave of final plan expirations."

Of the 629,000 forbearance plans slated to be reviewed for extension or removal this month, about 400,000 are set to reach their final plan expirations based on established allowable forbearance term lengths.

According to Black Knight's experts, "significant volume declines could be seen in coming weeks as those plans reach their final expirations and exiting borrowers return to making mortgage payments in October."

Throughout the coronavirus pandemic, the Consumer Financial Protection Bureau has been drafting and updating rules for servicers facing an onslaught of inflowing forbearance plans, and now, exits, in an effort to support what it calls "a smoother transition" within the housing market at large. Updated CFPB rules for loan servicers went into effect this past week. The bureau's Acting Director Dave Uejio says the rules give 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," he added.

Black Knight's weekly reports appear on the Black Knight blog.

About Author: Christina Hughes Babb

Christina Hughes Babb is a reporter for DS News and MReport. A graduate of Southern Methodist University, she has been a reporter, editor, and publisher in the Dallas area for more than 15 years. During her 10 years at Advocate Media and Dallas Magazine, she published thousands of articles covering local politics, real estate, development, crime, the arts, entertainment, and human interest, among other topics. She has won two national Mayborn School of Journalism Ten Spurs awards for nonfiction, and has penned pieces for Texas Monthly, Salon.com, Dallas Observer, Edible, and the Dallas Morning News, among others. Contact Christina at [email protected].

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