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Forbearance Activity ‘Warrants a Close Eye”

After inching up last week, forbearances fell by 137,000 since last Tuesday, due to October's forbearance expiration activity. The experts at Black Knight say this was "roughly what was expected for the first week of the month, though there is still some potential for further drops given the remaining scheduled expirations."

As Black Knight reported in its most recent Mortgage Monitor report, entering October there were some 700,000 plans set to expire at the end of this month. As of last week, 366,000 remained. Of those, 161,000 expired at the end of October, meaning about 200,000 were worked through in the last week of the month.

Two hundred twenty-five thousand homeowners were removed from forbearance last week, the largest number since the first week of October. Still, it was less than a third of what data collectors saw in that first week of the month, as there were far fewer plans set for expiration this month, reports Black Knight's research team.

In a decline seen across all investor classes, GSE forbearances dropped by 57,000; portfolio/PLS forbearances fell by 52,000, and FHA/VA forbearances dropped 43,000. GSE forbearances continued to show the strongest rate of improvement—the number of forbearance plans, as of this report, are down 48% from their peak in late May, followed by portfolio/PLS forbearances which are down 44% from their peak. FHA/VA loans continue to see the slowest improvement with forbearance volumes down just 27% from their peak earlier in the year.

As of November 3, 2.9 million active forbearance plans are in effect, representing some 5.4% of mortgage-holders, down from 5.7% last week "and the lowest we’ve seen since mid-April during the onset of the pandemic. Together, they represent $584B in unpaid principal," according to Black Knight.

Over the past week, researchers saw the largest volume of forbearance plans since April, but, explains Black Knight,  "57% of these repeat starts on folks who had been in forbearance, left their plans, and have now returned. Regardless, these starts and restarts are worth watching, as they're trending upward. It may well be that this is still due to the drop in early October, but given the rising trend, they warrant a close eye."

Extensions made up about 37% of activity, numbering 135,000 for the week. About 80% of active forbearance plans have been extended since March; the other 20% remain at the initial term.

Of loans backed by Fannie Mae or Freddie Mac, some 3.7% are in forbearance plans, while 9.3% of FHA/VA loans are in forbearance plans. For private label and banks' portfolio loans, 5.3% are in forbearance.

Black Knight compiles weekly reports from its McDash Flash Forbearance Tracker, charting volumes and related data, and posts a summary on its 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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