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Forbearances Drop for Fifth Consecutive Week

The number of Americans currently in forbearance plans continues to decline, as the total number of loans now in forbearance decreased by six basis points from 4.96% of servicers’ portfolio volume in the prior week to 4.90% as of March 28, 2021. These findings, from the Mortgage Bankers Association’s (MBA) latest Forbearance and Call Volume Survey, come on the same day the Consumer Financial Protection Bureau (CFPB) proposed changes to help prevent impending foreclosure actions as emergency federal foreclosure protections are eventually set to expire. According to MBA’s estimate, approximately 2.5 million homeowners are in forbearance plans.

“The share of loans in forbearance decreased for the fifth straight week, and new forbearance requests dropped to their lowest level since March 2020. The share of loans in forbearance also decreased for all three investor categories,” said Mike Fratantoni, MBA’s Senior Vice President and Chief Economist. “More than 21% of borrowers in forbearance extensions have now exceeded the 12-month mark. Of those that exited forbearance in March, more than 21% received a modification, indicating that their income had declined, and they could not afford their original mortgage payment.”

In terms of government investor categories, the share of Fannie Mae and Freddie Mac loans in forbearance decreased to 2.72%–a five-basis-point improvement. Ginnie Mae loans in forbearance decreased five basis points to 6.78%, while the forbearance share for portfolio loans and private-label securities (PLS) decreased by 10 basis points to 8.80%. The percentage of loans in forbearance for independent mortgage bank (IMB) servicers decreased five basis points to 5.18%, and the percentage of loans in forbearance for depository servicers declined seven basis points to 5.03%.

By stage, 13.7% of the total loans in forbearance were in the initial forbearance plan stage, while 84.1% were in a forbearance extension. The remaining 2.2% were forbearance re-entries.

“March was a turning point for the economy, with hiring shifting into a higher gear and the unemployment rate continuing to decline,” said Fratantoni. “However, there are still more than 4.2 million people who have been actively looking for work for more than six months. Homeowners who are still facing hardships and need to extend their forbearance term should contact their servicer.”

In order to get ahead of a potential wave of foreclosures when government extensions expire, the CFPB took actions today and proposed additional guidance for servicers as deadlines near.

“We will do everything in our power to ensure servicers work with struggling families to find solutions that prevent avoidable foreclosures,” assured CFPB Acting Director Dave Uejio.

Of the cumulative forbearance exits for the period from June 1, 2020, through March 28, 2021:

  • 6% resulted in a loan deferral/partial claim.
  • 5% represented borrowers who continued to make their monthly payments during their forbearance period.
  • 7% resulted in reinstatements, in which past-due amounts are paid back when exiting forbearance.
  • 9% represented borrowers who did not make all of their monthly payments and exited forbearance without a loss mitigation plan in place yet.
  • 0% resulted in a loan modification or trial loan modification.
  • 6% resulted in loans paid off through either a refinance or by selling the home.
  • The remaining 1.7% 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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