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Pace of Forbearance Exits Reaches New Low in January

Month-over-month, the number of loans now in forbearance nationwide decreased by 11 basis points from 1.41% of mortgage servicers' portfolio volume in the prior month to 1.30% as of January 31, 2022. These findings come from the Mortgage Bankers Association's (MBA) latest monthly Loan Monitoring Survey, which also estimates that 650,000 homeowners are currently in forbearance plans.

The share of GSE loans (Fannie Mae and Freddie Mac) in forbearance decreased four basis points, from 0.68% to 0.64%. Ginnie Mae loans in forbearance decreased three basis points from 1.63% to 1.60%, and the forbearance share for portfolio loans and private-label securities (PLS) saw the largest decline, falling off 41 basis points from 3.43% to 3.02%.

"For the second straight month, the pace of forbearance exits reached another low since MBA began tracking exits in June 2020," said Marina Walsh, CMB, MBA's VP of Industry Analysis. "There was also a pick-up in new forbearance requests and re-entries for all loans, and particularly, for Ginnie Mae loans. Even though the forbearance rate continued its downward trajectory, it was the smallest monthly decline since January 2021."

By stage, 26.8% of total loans in forbearance were in the initial forbearance plan stage, while 59.5% were in a forbearance extension. The remaining 13.7% were forbearance re-entries, including re-entries with extensions.

"The positive news is that the percentage of borrowers who were current on their mortgage payments increased from December 2021, said Walsh. “However, there was some deterioration in the performance of borrowers with existing loan workouts. Borrowers in loan workouts may have experienced new life events unrelated to the pandemic, or alternatively, the omicron variant may have triggered or re-triggered employment, health, or other stresses."

A slight downturn in the general strong employment numbers of late was reported by the U.S. Department of Labor (DOL), as for the week ending February 12, the advance figure for seasonally adjusted initial unemployment claims was 248,000, an increase of 23,000 from the previous week's revised level. The advance seasonally adjusted insured unemployment rate was 1.2% for the week ending February 5, unchanged from the previous week's unrevised rate. The advance number for seasonally adjusted insured unemployment during the week ending February 5 was 1,593,000, a decrease of 26,000 from the previous week's revised level.

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

  • Idaho
  • Colorado
  • Washington
  • Utah
  • Oregon

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

  • Louisiana
  • Mississippi
  • New York
  • Indiana
  • Illinois

Of the cumulative forbearance exits for the period from June 1, 2020, through January 31, 2022, at the time of forbearance exit:

  • 29.1% resulted in a loan deferral/partial claim.
  • 19.3% accounted for borrowers who continued to make their monthly payments during their forbearance period.
  • 17.0% represented borrowers who did not make all their monthly payments and exited forbearance without a loss mitigation plan in place.
  • 14.9% resulted in a loan modification or trial modification.
  • 11.6% resulted in reinstatements, in which past-due amounts are paid back when exiting forbearance.
  • 6.8% 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.

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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