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Forbearance Exits Hit Highest Pace in More Than a Year

According to the latest MBA Forbearance and Call Volume Survey, the number of loans in forbearance dropped by 27 basis points week-over-week for the period ending October 3, 2021. That put the level at "2.62% of servicers' portfolio volume" for the week, down from 2.89% the previous week, with the MBA report estimating that around 1.3 million homeowners currently remain in forbearance plans.

"Many borrowers reached the expiration of their forbearance term as we entered October," said Mike Fratantoni, MBA's SVP and Chief Economist. "The pace of exits climbed to the fastest pace in over a year, and the share of loans in forbearance declined at the fastest rate since last October."

Fratantoni noted that the largest decline was seen among Ginnie Mae and portfolio/PLS loans. The share of Fannie Mae/Freddie Mac loans in forbearance decreased week-over-week from 1.38% to 1.21%.

The economist continued, adding, "Payment performance has remained steady for those who have exited forbearance into a workout since 2020, with more than 85% of those borrowers current as of October. It also continues to be striking that so many homeowners in forbearance have continued to make their payments. Almost 16% of borrowers in forbearance as of October 3 were current."

Some other key findings from the report include:

  • By stage, 13.3% of total loans in forbearance are in the initial forbearance plan stage, while 77.5% are in a forbearance extension. The remaining 9.2% are forbearance re-entries.
  • Total weekly forbearance requests as a percent of servicing portfolio volume (#) increased relative to the prior week: from 0.04% to 0.05%.
  • Of the cumulative forbearance exits for the period from June 1, 2020, through October 3, 2021, at the time of forbearance exit:
    • 28.8% resulted in a loan deferral/partial claim
    • 21.3% represented borrowers who continued to make their monthly payments during their forbearance period
    • 16.5% represented borrowers who did not make all of their monthly payments and exited forbearance without a loss mitigation plan in place yet
    • 12.6% resulted in a loan modification or trial loan modification

Among the factors impacting the shift in forbearance volumes, Fratantoni cited job growth, school reopenings, and others. Fratantoni explained:

Job growth was weaker than expected in September, reflecting the challenges from the Delta variant, ongoing supply chain issues, and the resulting slowdowns in workplace and school re-openings. However, the drop in the unemployment rate, rising wages, and abundant job openings will continue to help support the housing market, including helping borrowers exit forbearance successfully in the weeks ahead.

To read the full details of the MBA report, click here.

About Author: David Wharton

David Wharton, Editor-in-Chief at the Five Star Institute, is a graduate of the University of Texas at Arlington, where he received his B.A. in English and minored in Journalism. Wharton has over 17 years' experience in journalism and previously worked at Thomson Reuters, a multinational mass media and information firm, as Associate Content Editor, focusing on producing media content related to tax and accounting principles and government rules and regulations for accounting professionals. Wharton has an extensive and diversified portfolio of freelance material, with published contributions in both online and print media publications. Wharton and his family currently reside in Arlington, Texas. He can be reached at David.Wharton@thefivestar.com.
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