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Number of Americans in Forbearance Plans Continues to Fall

The Mortgage Bankers Association's (MBA) latest Forbearance and Call Volume Survey has found that the total number of loans now in forbearance decreased by seven basis points from 3.47% of servicers' portfolio volume in the prior week to 3.40%, as of August 1, 2021. According to MBA's estimate, there are approximately 1.7 million homeowners currently in forbearance plans.

By stage, 9.7% of total loans in forbearance were in the initial forbearance plan stage, while 82.9% were in a stage of forbearance extension. The remaining 7.4% are forbearance re-entries.

"Forbearance exits increased as August began, and new forbearance requests declined, resulting in the largest decrease in the share of loans in forbearance in three weeks," said Mike Fratantoni, MBA's SVP and Chief Economist. "Nearly 1.7 million homeowners remain in forbearance, 13% of whom were current on their payments as of August 1st. Of those who exited forbearance last week, more than 10.5% were current. Forbearance has surely provided both insurance and assurance for many of these homeowners who worried about ongoing hardships, and it is positive to see so many continue to be able to make their payments while in forbearance."

The MBA also reported that the share of Fannie Mae and Freddie Mac loans in forbearance decreased five basis points from 1.79% to 1.74%. Ginnie Mae loans in forbearance decreased 12 basis points from 4.30% to 4.18%, while the forbearance share for portfolio loans and private-label securities (PLS) decreased seven basis points to 7.37%. The percentage of loans in forbearance for independent mortgage bank (IMB) servicers decreased four basis points to 3.63%, and the percentage of loans in forbearance for depository servicers decreased 10 basis points to 3.49%.

“Delinquency rates have increased slightly for borrowers who have exited forbearance and began repayment plans, deferral plans, or modifications over the course of the pandemic,” said Fratantoni. “However, July's strong job market report provides evidence of a rebounding economy, which should provide further support for homeowners exiting forbearance in the months ahead."

Late last week, the U.S. Bureau of Labor Statistics (BLS) reported that for the month of July 2021, total nonfarm payroll employment rose by 943,000, and the unemployment rate declined by 0.5 percentage point to 5.4 percent%, with job gains seen in leisure and hospitality, in local government education, and in professional and business services.

“The unemployment rate, derived from the household survey, fell by five-tenths to 5.4% in July, as household employment rose by more than one million and the labor force participation rate rose by one-tenth to 61.7%,” explained Doug Duncan, Fannie Mae Chief Economist. “The increase in participation is also a welcome sign given that it has been slow to recover toward its pre-pandemic level; participation is still 1.6 percentage points lower than in February 2020, as many people remain hesitant to return to the workforce for various reasons. Additionally, there were 930,000 voluntary job-leavers in July, and the number of persons working part-time but who would prefer full-time employment continued to trend down, both positive signs of a continued labor market recovery. Average hourly earnings growth accelerated to a 4.0% year-over-year pace, which we believe could potentially exacerbate pricing pressures already present in the economy. Finally, we note that residential construction employment grew by only 8,300 in July, down from the previous month; we believe more job gains will be needed here to ease supply constraints in this sector.”

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

  • 28.1% resulted in a loan deferral/partial claim.
  • 22.9% represented borrowers who continued to make their monthly payments during their forbearance period.
  • 15.7% represented borrowers who did not make all of their monthly payments and exited forbearance without a loss mitigation plan in place yet.
  • 13.3% resulted in reinstatements, in which past-due amounts are paid back when exiting forbearance.
  • 11.0% resulted in a loan modification or trial loan modification.
  • 7.5% resulted in loans paid off through either a refinance or by selling the home.
  • The remaining 1.5% resulted in repayment plans, short sales, deed-in-lieus or other reasons.

In terms of weekly servicer call center volume, calls increased relative to the prior week. from 5.5% to 6.8%, with the average call length increasing slightly from 7.8 minutes to 7.9 minutes.

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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