Forbearance Update: How Are Rates Changing?

This week’s Forbearance and Call Volume Survey from the Mortgage Bankers Association (MBA) found that the total number of loans now in forbearance decreased by one basis point from 4.50% of servicers' portfolio volume in the prior week to 4.49%. The MBA estimates that an approximate 2.25 million homeowners remain in forbearance plans nationwide.

After two weeks of large declines, this week’s slight downturn seemed like a blip after a 40 basis point drop the previous three weeks.

By investor type, the share of GSE loans (Fannie Mae and Freddie Mac) in forbearance remained the same over last week at 2.44%. Ginnie Mae loans in forbearance decreased seven basis points from 6.16% last week to 6.09%, while the forbearance share of portfolio loans and private-label securities (PLS) increased by eight basis points to 8.42%. The percentage of loans in forbearance for independent mortgage bank (IMB) servicers remained the same as the prior week at 4.72%, and the percentage of loans in forbearance for depository servicers declined three basis points to 4.64%.

"After two weeks of large declines, the share of loans in forbearance decreased for the eighth straight week, but by only one basis point. New forbearance requests increased, and the rate of exits declined," said Mike Fratantoni, MBA's SVP and Chief Economist. "More than 40% of borrowers in forbearance extensions have now exceeded the 12-month mark."

And with the June 30, 2021 deadline fast approaching for the extension of foreclosure moratoria, servicers are gearing up for what may be historic volumes in their sector. A recent DS News Webinar, “Forbearance Agreements: One Year Later-What Now?” took a look at what servicers have been doing over the past year in dealing with a new segment of customers. One major point was that educating the customer on their options has fallen onto the shoulders of the servicing industry.

“We are doing the typical phone calls, letters and e-mails, and are not using chat at the moment,” said Bob Caruso, President & CEO of ServiceMac LLC. “When customers were calling in and asking for forbearance, we elected to do something a little different in that we automated the back end of our process and forced our customers to talk to us before we give them forbearance just so that we can educate them on what an agreement is and what we knew, at that time, the pros and cons of that agreement.”

Weekly servicer call center volume as reported by the MBA for this past week increased from the previous week from 7.9% to 8.5%, with the average call time remaining the same at eight minutes.

By stage, 12.9% of total loans in forbearance were in the initial forbearance plan stage, while 82.4% were in a stage of extension. The remaining 4.7% were forbearance re-entries.

Of the cumulative forbearance exits for the period from June 1, 2020, through April 18, 2021:

• 9% resulted in a loan deferral/partial claim.
• 4% represented borrowers who continued to make their monthly payments during their forbearance period.
• 6% represented borrowers who did not make all of their monthly payments and exited forbearance without a loss mitigation plan in place yet.
• 4% resulted in reinstatements, in which past-due amounts are paid back when exiting forbearance.
• 6% resulted in a loan modification or trial loan modification.
• 5% resulted in loans paid off through either a refinance or by selling the home.
• The remaining 1.6% resulted in repayment plans, short sales, deed-in-lieus or other reasons.