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Number of GSE Loans in Forbearance Continues to Drop

The Mortgage Bankers Association’s (MBA) latest Loan Monitoring Survey reveals that the total number of loans now in forbearance decreased by five basis points from 0.60% of servicers’ portfolio volume in the prior month, to 0.55% as of March 31, 2023.

The MBA estimates that 275,000 homeowners are currently still in forbearance plans. The MBA also reports that mortgage servicers nationwide have provided forbearance options and plans to approximately 7.8 million borrowers since March 2020, the outset of the pandemic.

In March 2023, the share of Fannie Mae and Freddie Mac (GSE) loans in forbearance decreased two basis points from 0.28% to 0.26%, while Ginnie Mae loans in forbearance decreased 10 basis points from 1.28% to 1.18%, and the forbearance share for portfolio loans and private-label securities (PLS) decreased 10 basis points from 0.78% to 0.68%.

“As the COVID-19 national emergency draws to a close, the number of loans in forbearance continues to drop,” said Marina Walsh, CMB, MBA’s VP of Industry Analysis. “Mortgage performance remains strong with the percentage of borrowers who were current on their mortgage payments and post-forbearance workouts increasing in March.”

By stage, 33.8% of total loans in forbearance were in the initial forbearance plan stage, while 52.9% were in a forbearance extension. The remaining 13.3% represent forbearance re-entries, including re-entries with extensions.

Regionally, the five states with the highest share of loans that were current as a percent of servicing portfolio included Washington, Idaho, Colorado, Utah, and California. The five states reporting the lowest share of loans that were current as a percent of servicing portfolio: Louisiana, Mississippi, New York, Oklahoma, and West Virginia.

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

  • 29.6% resulted in a loan deferral/partial claim.
  • 18.0% represented borrowers who continued to make their monthly payments during their forbearance period.
  • 17.7% represented borrowers who did not make all of their monthly payments and exited forbearance without a loss mitigation plan in place yet.
  • 16.1% resulted in a loan modification or trial loan modification.
  • 10.9% 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.

Total loans serviced that were current (not delinquent or in foreclosure) as a percent of servicing portfolio volume (#) increased to 96.35% in March 2023 from 95.76% in February 2023 (on a non-seasonally adjusted basis). While 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 increased to 76.70% in March, up from 76% reported the previous month.

“MBA’s forecast still calls for a recession in 2023, which may change the current performance levels, but credit quality is generally good and many borrowers facing financial hardship can now access enhanced loss mitigation options that resulted from successes of pandemic-related policies,” added Walsh.

According to the U.S. Bureau of Labor Statistics (BLS), total nonfarm payroll employment rose by 236,000 in March, as employment continued to trend upward in leisure and hospitality, government, professional and business services, and healthcare. Both the unemployment rate, at 3.5%, and the number of unemployed persons, at 5.8 million, changed little in March, measures that have shown little net movement since early 2022.

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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