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Forbearance Update: Declining Volumes as Agreements Expire

The latest Forbearance and Call Volume Survey from the Mortgage Bankers Association (MBA) shows that the total number of loans now in forbearance decreased by 34 basis points from 2.62% of servicers’ portfolio volume in the prior week to 2.28% as of October 10, 2021.

The MBA now estimates that approximately 1.1 million U.S. homeowners are in forbearance plans.

By type, the share of Fannie Mae and Freddie Mac (GSE) loans in forbearance decreased 16 basis points from 1.21% to 1.05%. Ginnie Mae loans in forbearance decreased 17 basis points from 2.94% to 2.77%, and the forbearance share of portfolio loans and private-label securities (PLS) declined 108 basis points from 6.42% to 5.34%. The percentage of loans in forbearance for independent mortgage bank (IMB) servicers decreased 25 basis points relative to the prior week to 2.57%, and the percentage of loans in forbearance for depository servicers decreased 53 basis points to 2.16%.

By stage, 14.8% of total loans in forbearance were in the initial forbearance plan stage, while 75.5% were in a forbearance extension. The remaining 9.7% represented forbearance re-entries.

“Forbearance exits continued at an even more robust pace, resulting in a 34 basis-point decline in the overall forbearance rate. The decline was apparent across all servicer types and investor types,” said Mike Fratantoni, MBA’s Senior VP and Chief Economist. “There was a substantial drop of over one percentage point in the forbearance rate for portfolio and PLS loans, which includes loans held for investment purposes, loans serviced for private investors, and government loans that were bought out of Ginnie Mae pools for the purposes of modifying them and then re-securitizing them into Ginnie Mae pools.”

Of the cumulative forbearance exits for the period from June 1, 2020, through October 10, 2021, at the time of forbearance exit:

  • 28.9% resulted in a loan deferral/partial claim.
  • 20.8% represented borrowers who continued to make their monthly payments during their forbearance period.
  • 16.7% represented borrowers who did not make all of their monthly payments and exited forbearance without a loss mitigation plan in place yet.
  • 12.9% resulted in a loan modification or trial loan modification.
  • 12.2% resulted in reinstatements, in which past-due amounts are paid back when exiting forbearance.
  • 7.1% 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.

“We are now down to 1.1 million homeowners in forbearance from a peak of 4.3 million homeowners in June 2020,” said Fratantoni. “Positive employment and wage prospects, continued home-price appreciation, and the availability of multiple loan workout options are factors that will smooth many homeowners’ transition out of forbearance.”

Contributing to the number of homeowners exiting forbearance was good news from the U.S. Department of Labor, who reported that for the week ending October 9, the advance figure for seasonally adjusted initial unemployment claims was 293,000, a decrease of 36,000 from the previous week's revised level, marking the lowest level for initial claims since March 14, 2020 when it was 256,000.

In terms of weekly servicer call center volume, calls decreased relative to the prior week, from 7.8% to 7.4%, as the average speed to answer increased from 2.5 minutes to 2.6 minutes, with the average call length decreasing from 8.4 minutes to 8.3 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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