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Forbearance Rates Experience Biggest Weekly Drop Since Pandemic Began

low income householdsThe volume of mortgages in active forbearance saw its greatest decline since the pandemic began, according to new data released by Black Knight’s McDash Flash Forbearance Tracker.

As of October 6, 2.97 million homeowners carried COVID-19-related forbearance plans, representing 5.6% of all active mortgages. This is down from 6.8% one week earlier, and the two weeks combined represented $614 billion in unpaid principal.

For the week ending October 9, Black Knight found there were 649,000 fewer active forbearances compared to the previous week, an 18% decline. This marked the first time since mid-April that the total number of forbearance plans were below the 3 million level.

Black Knight attributed this activity to the first wave of forbearance plans reaching the end of their initial six-month term. Furthermore, Black Knight noted this week’s decline was significantly greater than the 435,000 weekly reduction that was recorded the first wave of forbearances hit the three-month mark back in early July.

This week’s decline impacted all investor classes, with the greatest reduction in active forbearances occurring in portfolio-held and private labeled security loans—a drop of 228,000, or -24%). Government-sponsored enterprise (GSE) and FHA/VA loans saw declines of 213,000 (-16%) and 208,000 (-15%), respectively.

Black Knight added that 5.6% of loans in private label securities or banks’ portfolios and 4% of all GSE-backed loans and 9.4% of all FHA/VA loans remain in active plans.

“Some 78% of loans in active forbearance have had their terms extended at some point since March,” said Black Knight in a blog posting. “Given that there are another 800,000 forbearances reaching the end of their initial six-month terms over the next 30 days, it’s likely we will see heightened expiration/extension activity throughout October.”

Black’s Knight new data report did not incorporate geographic considerations into forbearance activity. However, a separate report issued by ATTOM Data Solutions determined that the West and Midwest were less likely to experience COVID-related economic challenges while pockets of the Northeast and Mid-Atlantic regions risked being more vulnerable during the third quarter of this year. ATTOM’s report showed clusters in New York City, Baltimore, Philadelphia, and Washington D.C. at greater risk in the third quarter, while 32 of the 50 most vulnerable counties were spread among Connecticut, New York, New Jersey, Pennsylvania, Maryland, and Delaware.

About Author: Phil Hall

Phil Hall is a former United Nations-based reporter for Fairchild Broadcast News, the author of nine books, the host of the award-winning SoundCloud podcast "The Online Movie Show," co-host of the award-winning WAPJ-FM talk show "Nutmeg Chatter" and a writer with credits in The New York Times, New York Daily News, Hartford Courant, Wired, The Hill's Congress Blog and Profit Confidential. His real estate finance writing has been published in the ABA Banking Journal, Secondary Marketing Executive, Servicing Management, MortgageOrb, Progress in Lending, National Mortgage Professional, Mortgage Professional America, Canadian Mortgage Professional, Mortgage Professional News, Mortgage Broker News and HousingWire.

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