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Forbearance Exits Continue to Slow

The Mortgage Bankers Association's (MBA) latest Forbearance and Call Volume Survey for the week ending October 17 revealed that the total number of loans now in forbearance decreased by seven basis points from 2.28% of servicers' portfolio volume the prior week to 2.21%. The MBA estimates that approximately 1.1 million U.S. homeowners remain in forbearance plans.

The share of GSE loans (Fannie Mae and Freddie Mac) in forbearance decreased five basis points from 1.05% to just 1.00%. Ginnie Mae loans in forbearance decreased five basis points from 2.77% to 2.72%, and the forbearance share for portfolio loans and private-label securities (PLS) declined 13 basis points from 5.34% to 5.21%. The percentage of loans in forbearance for independent mortgage bank (IMB) servicers decreased eight basis points relative to the prior week to 2.49%, and the percentage of loans in forbearance for depository servicers decreased five basis points to 2.11%.

"Following two weeks of rapid declines, the share of loans in forbearance dropped again, but at a reduced rate. As reported in the past, many servicers process forbearance exits at the beginning of the month, therefore it is not surprising to see the pace of exits slow again mid-month," said Mike Fratantoni, MBA's SVP and Chief Economist. "The composition of loans in forbearance is evolving. More than 25% of loans in forbearance are now made up of new forbearance requests and re-entries, while many other homeowners who have reached the end of 18-month terms are successfully exiting into deferrals or modifications."

By stage, 15.3% of total loans in forbearance were in the initial forbearance plan stage, while 74.8% were in a forbearance extension—down from last week’s total of 75.5%. The remaining 9.9% were forbearance re-entries.

Forbearances are expected to continue at a quick pace, as more Americans are returning to the workforce. Late last week, the U.S. Department of Labor reported that the advanced figure for seasonally adjusted initial unemployment claims was 290,000, a decrease of 6,000 from the previous week's revised level, marking the lowest level for initial claims since March 14, 2020 when it was 256,000.

Of the cumulative forbearance exits for the period from June 1, 2020, through October 17, 2021, at the time of forbearance exit:

  • 29.1% resulted in a loan deferral/partial claim.
  • 20.7% 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.
  • 13.0% resulted in a loan modification or trial loan modification.
  • 12.1% 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 1.3% resulted in repayment plans, short sales, deed-in-lieus or other reasons.

In terms of weekly servicer call center volume, servicer calls increased relative to the prior week, from 7.4% to 7.7%, with the average speed to answer decreasing from 2.6 minutes to 2.1 minutes, and the average call length decreasing from 8.3 minutes to 7.9 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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