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Number of Loans in Forbearance Approaches the 1% Mark

Nationwide, the number of loans in forbearance decreased by 13 basis points from 1.18% of servicers’ portfolio volume the prior month to just 1.05% as of March 31, 2022. According to the Mortgage Bankers Association’s (MBA) monthly Loan Monitoring Survey, an estimated 525,000 U.S. homeowners are currently in forbearance plans.

“March was another month of lower forbearance rates, and a higher share of overall loans and forbearance-related workout loans that are current,” said Marina Walsh, CMB, MBA’s VP of Industry Analysis. “The share of loans in forbearance continues to dwindle and is just five basis points shy of hitting 1%—or 500,000 homeowners—after peaking at 4.3 million borrowers in June 2020. It has been a remarkable recovery for many homeowners in less than two years.”

By loan type, the share of Fannie Mae and Freddie Mac (GSE) loans in forbearance decreased seven basis points from 0.56% to 0.49%, while Ginnie Mae loans in forbearance decreased 12 basis points from 1.50% to 1.38%. The forbearance share for portfolio loans and private-label securities (PLS) declined 28 basis points from 2.72% to 2.44%.

By stage, 29.7% of total loans in forbearance are in the initial forbearance plan stage, while 57.2% are in a forbearance extension. The remaining 13.1% are forbearance re-entries, including re-entries with extensions.

Despite inflationary concerns and the rise in rates, modest improvements in the employment sector is supporting the rise in forbearance exits, as the U.S. Department of Labor reported that the advance seasonally adjusted insured unemployment rate was 1.1% for the week ending April 2, unchanged from the previous week's rate. The advance number for seasonally adjusted insured unemployment during the week ending April 2 fell to 1,475,000, a decrease of 48,000 from the previous week's unrevised level of 1,523,000. The four-week average was 1,511,500, a decrease of 29,750 from the previous week's unrevised average of 1,541,250.

Of the cumulative forbearance exits for the period from June 1, 2020, through March 31, 2022, at the time of forbearance exit:

  • 29.2% resulted in a loan deferral/partial claim.
  • 18.9% represented borrowers who continued to make their monthly payments during their forbearance period.
  • 17.1% represented borrowers who did not make all of their monthly payments and exited forbearance without a loss mitigation plan in place yet.
  • 15.4% resulted in a loan modification or trial loan modification.
  • 11.4% resulted in reinstatements, in which past-due amounts are paid back when exiting forbearance.
  • 6.7% resulted in loans paid off through either a refinance or by selling the home.
  • The remaining 1.3% resulted in repayment plans, short sales, deed-in-lieus or other reasons.

By region, the five states with the highest share of loans that were current as a percent of servicing portfolio included: Idaho, Washington, Colorado, Utah, and Oregon. Conversely, the five states recording the lowest share of loans that were current as a percent of servicing portfolio were Louisiana, Mississippi, New York, West Virginia, and Oklahoma.

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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