The latest U.S. RMBS Servicer Metric Report examining the Q3 of 2021 from Fitch Ratings has found that non-prime loan modifications surged as forbearance plans expire across the sector.
Forbearance plans experienced a year-over-year drop to 43% from 87% of all loan workout options, while loan modifications quadrupled to 40% from 10% year-over-year as a percentage of loss mitigation portfolios for bank servicers.
“Loan modifications have seen significant increases as borrowers exited forbearance plans in the third quarter, and forbearances are now down to 43% of all loan workouts, as reported by bank servicers,” said Fitch Ratings Director Richard Koch. “Bank servicers showed significant loss mitigation activity over the past year; non-bank servicers are reporting similar loss mitigation trends, albeit to a more modest degree.”
Fitch found that these results indicate that borrowers are exiting forbearance agreements in favor of loan modifications or paying current on accounts. Non-bank servicers, meanwhile, reported a 10% decrease year-over-year in forbearance plans, peaking in Q1 of 2021 at 71%, while tripling the percentage of loan modifications to 19% from 6.61% year-over-year.
According to the Fitch report, bank and non-bank servicers reported no movement in the 60-plus-day delinquency category; this remained constant at 2% throughout all three quarters of 2021. Serious delinquencies of 90-plus-day past due accounts as reported by bank and non-bank servicers continued a moderate quarterly decline over this period.
The Mortgage Bankers Association (MBA), in its latest Loan Monitoring Survey, reported that the total number of loans in forbearance nationwide decreased by 26 basis points from 1.67% of servicers' portfolio volume in the prior month to 1.41% as of December 31, 2021.
The MBA estimates that 705,000 U.S. homeowners are currently in forbearance plans.