Forbearance heading one direction: down

Forbearance heading one direction: down
Forbearance declined across the board this week as government agencies and industry stakeholders chart a path out of forbearance and into loss-mitigation.

The total number of loans still in forbearance was down 34 basis points from 2.62% of servicers’ portfolio volume the prior week to 2.28% the week ending Oct. 10, 2021, per the latest report from the Mortgage Bankers Association.

Just over one million homeowners are still in forbearance plans.

The share of forbearance for those with government sponsored enterprise loans decreased to 1.05%, while the share of Ginnie Mae-backed loans in forbearance decreased 17 basis points to 2.77%. The forbearance rate for loans not backed by the government, either because they are held in portfolio or are private-label securities, also declined by 108 basis points to 5.34%.

Loans in forbearance for depository servicers and independent mortgage bank servicers decreased 25 basis points to 2.57% and 53 basis points to 2.16%, respectively.

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“Forbearance exits continued at an even more robust pace, resulting in a 34 basis-point decline in the overall forbearance rate. The decline was apparent across all servicer types and investor types,” said Mike Fratantoni, MBA’s chief economist. “There was a substantial drop of over 1 percentage point in the forbearance rate for portfolio and PLS loans, which includes loans held for investment purposes, loans serviced for private investors, and government loans that were bought out of Ginnie Mae pools for the purposes of modifying them and then re-securitizing them into Ginnie Mae pools.”

Weekly call volume for servicers was also down, from 7.8% the week prior to 7.4%.

As government forbearance plans wind down, the focus is increasingly shifting to loss-mitigation efforts. Mortgage servicers, lenders, state housing finance agencies and the U.S. Department of the Treasury are working to strike a balance between offering targeted relief to borrowers through the Homeowners Assistance Fund and putting those plans into place.

The Urban Institute last week convened a panel of experts from industry stakeholders, the Treasury, as well as state finance agencies and the Native American Indian Housing Council to discuss the deployment of the Homeowners Assistance Fund as forbearance draws to a close.

Meg Burns, executive vice president of the Housing Policy Council, said that the “passage of time is reshaping the population that could be served” by the $10 billion in funds for assistance.

“The opportunity to match [Homeowners Assistance Funds] funds with some of the other resources suggests that complex rules that would narrow the population that’s targeted for this assistance or complex program designs that try to custom tailor a solution for each household really may not be warranted,” Burns said.
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