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Forbearance Exits Continue to Rise as Re-Entries Decline

The latest Forbearance and Call Volume Survey from the Mortgage Bankers Association (MBA) has found that the total number of loans now in forbearance decreased by seven basis points from 2.96% of servicers' portfolio volume the prior week, to 2.89% for the week ending September 26, 2021. The MBA estimates that approximately 1.4 million homeowners remain in forbearance plans.

The share of Fannie Mae and Freddie Mac (GSE) loans in forbearance decreased six basis points from 1.44% to 1.38%, while Ginnie Mae loans in forbearance decreased seven basis points from 3.42% to 3.35%. The forbearance share for portfolio loans and private-label securities (PLS) decreased 14 basis points from 6.91% to 6.77%. The percentage of loans in forbearance for independent mortgage bank (IMB) servicers decreased five basis points relative to the prior week to 3.19%, and the percentage of loans in forbearance for depository servicers decreased 13 basis points to 2.93%.

By stage, 12.4% of total loans in forbearance were in an initial forbearance plan stage, while 78.7% were in a forbearance extension, and the remaining 8.9% were forbearance re-entries.

"The share of loans in forbearance declined at a faster rate last week, dropping by seven basis points, as exits increased and new requests and re-entries declined," said Mike Fratantoni, MBA's SVP and Chief Economist. "While 1.4 million homeowners remained in forbearance as of September 26th, this number is expected to drop sharply over the next few weeks, as many are reaching the 18-month expiration point of their forbearance terms. Most borrowers exiting forbearance through a workout are opting for a deferral plan, which allows them to resume their original payment, while moving the forborne amount to the end of the loan."

As a percent of servicing portfolio volume, calls decreased relative to the prior week, from 7.9% to 5.9%, with the average call length remaining the same as the previous week at 8.2 minutes.

"Although call volume dropped in the last week of September, we expect that servicers will be very busy through October,” said Fratantoni.

Of the cumulative forbearance exits for the period from June 1, 2020, through September 26, 2021, at the time of forbearance exit:

  • 28.9% resulted in a loan deferral/partial claim.
  • 21.7% represented borrowers who continued to make their monthly payments during their forbearance period.
  • 16.1% represented borrowers who did not make all their monthly payments and exited forbearance without a loss mitigation plan in place yet.
  • 12.5% resulted in reinstatements, in which past-due amounts are paid back when exiting forbearance.
  • 12.0% resulted in a loan modification or trial loan modification.
  • 7.4% resulted in loans paid off through either a refinance or by selling the home.
  • The remaining 1.4% resulted in repayment plans, short sales, deed-in-lieus or other reasons.

"Borrowers appear to be exiting in an orderly fashion; the payment deferral/partial claim is now the leading reason for exit. Under this scenario, borrowers are resuming their scheduled monthly payments-versus  a modification which lowers the payments-a positive sign that things are returning to 'normal,'" said Matt Tully, Chief Compliance Officer and Head of Agency Affairs at Sagent. "Borrowers exiting without a post-accommodation plan in place have dropped to below 5%, reflecting that servicer outreach efforts are working. On the negative side, forbearance re-entry numbers continue to creep back up, showing that we are not out of the woods yet when it comes to dealing with borrowers impacted by the pandemic."

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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