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Share of Loans in Forbearance Inches Closer to 2% Mark

The Mortgage Bankers Association's (MBA) latest Forbearance and Call Volume Survey found that the total number of U.S. home loans now in forbearance decreased by nine basis points from 2.15% of servicers' portfolio volume in the prior week to 2.06%.

This latest report marks the final MBA Weekly Forbearance and Call Volume Survey before switching to a monthly format in December that will be called Monthly Loan Monitoring Survey.

The MBA’s analysis represents 73% of the first-mortgage servicing market (approximately 36.7 million loans), and of that total, an estimated one million homeowners remain in forbearance plans.

By stage, 15.8% of total loans in forbearance were in the initial forbearance plan stage, while 73.9% were in a forbearance extension, as the remaining 10.3% represented forbearance re-entries.

"One million homeowners remained in forbearance as we reached the end of October, but the forbearance share continued to decline, with larger declines for portfolio and PLS loans," said Mike Fratantoni, MBA's SVP and Chief Economist. "More borrowers who exited forbearance the last week of October went into modifications, a sign that they have not yet regained their pre-pandemic level of income."

By loan type, the share of GSE (Fannie Mae and Freddie Mac) loans in forbearance decreased five basis points from 0.97% to 0.92%, while Ginnie Mae loans in forbearance decreased 13 basis points from 2.65% to 2.52%.

The forbearance share for portfolio loans and private-label securities (PLS) declined 13 basis points from 5.23% to 5%.

The percentage of loans in forbearance for independent mortgage bank (IMB) servicers decreased 15 basis points relative to the prior week to 2.28%, and the percentage of loans in forbearance for depository servicers decreased five basis points to 2.02%.

Of the cumulative forbearance exits for the period from June 1, 2020, through October 31, 2021, at the time of forbearance exit:

  • 29.1% have resulted in a loan deferral/partial claim
  • 20.4% have represented borrowers who continued to make their monthly payments during their forbearance period
  • 16.7% have represented borrowers who did not make all their monthly payments and exited forbearance without a loss mitigation plan in place
  • 13,4% have resulted in a loan mod or trial loan mod
  • 12.0% have resulted in reinstatements, in which past-due amounts are paid back when exiting forbearance
  • 7.0% have resulted in loans paid off through either a refinance or sale of the home
  • The remaining 1.4% have resulted in repayment plans, short sales, deed-in-lieus, or other reasons

“The Bureau of Labor Statistics reported that the American economy added 531,000 jobs in the month of October, and the unemployment rate was 4.6%, down from 4.8% in September,” noted U.S. Secretary of Labor Marty Walsh. “The Biden-Harris Administration is getting Americans back to work at a historic pace, with 5.6 million jobs added since the President took office and an average of 620,000 jobs per month. October growth was strong across the private sector, with especially significant gains in manufacturing, business services, leisure and hospitality and the care economy, all hit hard by COVID.”

Last week, the U.S. Department of Labor reported that the advance figure for seasonally-adjusted initial unemployment claims was 269,000, a decrease of 14,000 from the previous week's revised level, the lowest level for initial claims since March 14, 2020 when it was 256,000.

"The strong job market report from October, with another drop in the unemployment rate and a pickup in wage growth, is a positive sign for homeowners still struggling to get back on their feet," said Fratantoni.

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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