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Overall Performance of Servicing Portfolios Declined in December

The Mortgage Bankers Association’s (MBA) latest Loan Monitoring Survey has revealed that the total number of loans now in forbearance nationwide continues to fall, dropping by three basis points from 0.26% of servicers’ portfolio volume in the prior month to 0.23% as of December 31, 2023.

The MBA estimates that 115,000 homeowners are in forbearance plans nationwide, as mortgage servicers have provided forbearance to approximately 8.1 million borrowers since March 2020.

In December 2023, the share of GSE loans (Fannie Mae and Freddie Mac) in forbearance declined one basis point from 0.16% to 0.15%. Ginnie Mae loans in forbearance decreased eight basis points from 0.47% to 0.39%, and the forbearance share for portfolio loans and private-label securities (PLS) decreased three basis points from 0.30% to 0.27%.

“Forbearance as a loss mitigation option is diminishing,” said Marina Walsh, CMB, MBA’s VP of Industry Analysis. “While forbearance is a powerful tool for delinquency surges resulting from natural disasters or major disruptions such as a pandemic, today’s borrowers are not experiencing widespread financial distress. The overall performance of servicing portfolios–particularly government loans–declined in December. Factors such as seasonality, a changing labor market, resumption of student loan payments, and the rise in balances on other forms of consumer debt are likely at play.”

Walsh also noted that MBA anticipates that the unemployment rate, a leading indicator of mortgage performance, is expected to increase gradually to 4.5% by the end of 2024, up from 3.7% at year-end 2023.

According to the Bureau of Labor Statistics (BLS), total nonfarm payroll employment increased by 216,000 in December, and the unemployment rate was unchanged at 3.7%. Employment continued to trend up in government, healthcare, social assistance, and construction, while transportation and warehousing lost jobs.

By reason, 61.2% of borrowers are in forbearance for reasons such as a temporary hardship caused by job loss, death, divorce, or disability; while 26.8% of borrowers are in forbearance due to COVID-19-related reasons. Another 12% are in forbearance due to natural disasters.

By stage, 51.7% of total loans in forbearance are in the initial forbearance plan stage, while 31.5% are in a forbearance extension. The remaining 16.8% are forbearance re-entries, including re-entries with extensions.

Of the cumulative forbearance exits for the period from July 1, 2020, through December 31, 2023, at the time of forbearance exit:

  • 29.4% resulted in a loan deferral/partial claim.
  • 17.7% represented borrowers who continued to make their monthly payments during their forbearance period.
  • 18.5% represented borrowers who did not make all of their monthly payments and exited forbearance without a loss mitigation plan in place yet.
  • 16.0% resulted in a loan modification or trial loan modification.
  • 10.7% resulted in reinstatements, in which past-due amounts are paid back when exiting forbearance.
  • 6.5% resulted in loans paid off through either a refinance or by selling the home.
  • The remaining 1.2% resulted in repayment plans, short sales, deed-in-lieus or other reasons.

The five states reporting the highest share of loans that were current as a percent of servicing portfolio included:

  • Washington
  • Colorado
  • Idaho
  • Oregon
  • Montana

The five states with the lowest share of loans that were current as a percent of servicing portfolio included:

  • Louisiana
  • Mississippi
  • Indiana
  • New York
  • Illinois

Total completed loan workouts from 2020 and onward (repayment plans, loan deferrals/partial claims, loan modifications) that were current as a percent of total completed workouts were 74.39% in December 2023, which was 21 basis points below the percentage of total loans serviced that were current for the month.

MBA’s monthly Loan Monitoring Survey covers the period from December 1 through December 31, 2023, and represents 64% of the first-mortgage servicing market (31.9 million loans).

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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