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‘Slow and Steady Decrease’: Shifts in Mortgage Forbearance Rates

GSE loansThe number of loans now in forbearance dipped six basis points from 6.87% of servicers' portfolio volume the week before to 6.81% as of Sept. 27, according to the Mortgage Bankers Association's (MBA) latest Forbearance and Call Volume Survey. A total of 3.4 million homeowners are in forbearance plans, the MBA estimates.  This survey represents 74% of the first-mortgage servicing market or 37.1 million loans.

For the 17th consecutive week, there was a decline in the share of Freddie Mae and Freddie loans in forbearance, sitting at 4.39%, an uptick of 7 basis-points. Meantime, there was a one basis point bounce to 9.16% in Ginnie Mae loans in forbearance. The forbearance share for portfolio loans and private-label securities (PLS) toppled 13 basis points to 10.39%.

Also falling, 8 basis points to 7.03%, was the percentage of loans in forbearance for depository servicers. And they weren’t alone. The percentage of loans in forbearance for independent mortgage bank (IMB) servicers, also took a hit, plunging 4 basis points to 7.19%.

"As of the end of September, there continues to be a slow and steady decrease in the share of loans in forbearance—driven by consistent declines in the GSE loan share—and a persistently high amount in the Ginnie Mae portfolio," said Mike Fratantoni, MBA's Senior Vice President and Chief Economist. "The significant churn in the labor market now, more than six months into the pandemic, is still causing financial distress for millions of homeowners. As a result, more than 70% of loans in forbearance are now in an extension."

The total number of loans in forbearance fell by 38 basis points to 7.8% as of July 12, 2020, with the MBA estimating 3.9 million homeowners are still in forbearance plans, DSNews reported at the time.

The MBA’s prior report found 8.18% of loans were in forbearance. Its latest survey covers the period from July 6 through July 12 and represents 75% of the mortgage market or 37.3 million loans.

Loans guaranteed by the GSEs that are in forbearance fell for the sixth consecutive week to 5.64%, which is a 43-basis-point drop. Ginnie Mae loans in forbearance fell 30 basis points to 10.26%.

"The share of loans in forbearance dropped to its lowest level in over two months, driven by an increase in the pace of exits as more homeowners have been able to get back to work," said Mike Fratantoni, MBA's SVP and Chief Economist. "The decline in the forbearance share was broad-based, with decreases for GSE, Ginnie Mae, and portfolio/PLS loans."

Fratantoni added that nearly half of the borrowers remaining in forbearance plans are now in an extension of the original term.

“The pace of new forbearance requests remains quite low compared to earlier in the crisis, but we are watching carefully for any increases due to either the pick-up in COVID-19 cases or the cessation of enhanced unemployment insurance benefits at the end of this month,” he said.

About Author: Christina Hughes Babb

Christina Hughes Babb is a reporter for DS News and MReport. A graduate of Southern Methodist University, she has been a reporter, editor, and publisher in the Dallas area for more than 15 years. During her 10 years at Advocate Media and Dallas Magazine, she published thousands of articles covering local politics, real estate, development, crime, the arts, entertainment, and human interest, among other topics. She has won two national Mayborn School of Journalism Ten Spurs awards for nonfiction, and has penned pieces for Texas Monthly, Salon.com, Dallas Observer, Edible, and the Dallas Morning News, among others.
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