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Pace of Forbearance Exits Hits Two-Year Low

The latest Loan Monitoring Survey from the Mortgage Bankers Association (MBA) has found the total number of loans currently in forbearance decreased by 11 basis points from 1.05% of servicers’ portfolio volume in March to 0.94% as of April 30, 2022. The MBA estimates that there are approximately 470,000 homeowners nationwide currently in forbearance plans.

“With the number of borrowers in forbearance decreasing to less than half a million, the pace of monthly forbearance exits reached its lowest level since MBA started tracking exits in June 2020,” said Marina Walsh, CMB, MBA’s VP of Industry Analysis. “Servicers are expected to continue making small incremental inroads to the remaining loans in forbearance.”

By loan type, the share of Fannie Mae and Freddie Mac (GSE) loans in forbearance decreased six basis points from 0.49% to 0.43%, while the percentage of Ginnie Mae loans in forbearance decreased 11 basis points, dropping from to 1.38% in March to 1.29%. The forbearance share of portfolio loans and private-label securities (PLS) saw the greatest decline, sliding 29 basis points from 2.44% to 2.15%.

Walsh commented gains and strength in the overall U.S. jobs market contributing to percentage of borrowers who were current on their mortgage payments, which increased to its highest level of 2022, despite potential headwinds such as high inflation and stock market volatility.

“The best indicator of loan performance is overall national employment,” noted Walsh. “The U.S. unemployment rate is still below 4%, leaving borrowers in a good position to make their monthly mortgage payments.”

By stage, 28.9% of total loans in forbearance were in the initial forbearance plan stage, while 58.1% were in a forbearance extension. The remaining 13% are forbearance re-entries, including re-entries with extensions.

Of the cumulative forbearance exits for the period from June 1, 2020, through April 30, 2022, at the time of forbearance exit:

  • 29.3% resulted in a loan deferral/partial claim.
  • 18.8% represented borrowers who continued to make their monthly payments during their forbearance period.
  • 17% represented borrowers who did not make all their monthly payments and exited forbearance without a loss mitigation plan in place yet.
  • 15.6% resulted in a loan modification or trial loan modification.
  • 11.3% 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.

Regionally, the five states with the highest share of loans that were current as a percentage of servicing portfolio were Idaho, Washington, Colorado, Utah, and Oregon. On the opposite end of the spectrum, the five states with the lowest share of loans that were current as a percentage of servicing portfolio: Louisiana, Mississippi, West Virginia, New York, and Oklahoma.

MBA’s monthly Loan Monitoring Survey reports on the period from April 1 through April 30, 2022, spanning 72% of the first-mortgage servicing market (approximately 36.2 million loans).

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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