Forbearances fall for third week in a row, to 5.22%

Forbearances fall for third week in a row, to 5.22%
The total number of mortgages in forbearance declined seven basis points to 5.22% in the week ending Feb. 14, according to the latest estimate from the Mortgage Bankers Association.

The trade group said 2.6 million homeowners are currently in forbearance plans.

“The share of loans in forbearance has declined for three weeks in a row, with portfolio and PLS loans decreasing the most this week. This decline was due to a sharp increase in borrower exits, particularly for IMB servicers,” said Mike Fratantoni, MBA’s senior vice president and chief economist.

Fannie Mae and Freddie Mac‘s forbearance portfolio continued to express the lowest share of loans, decreasing four basis points to 2.97%. Ginnie Mae‘s share, which include loans backed by the Federal Housing Administration, fell 2 basis points to 7.32%, while the share for portfolio loans and private-label securities (PLS) dropped a full 20 basis points from the prior week, at 8.94%.

The percentage of loans in forbearance for nonbank servicers also dropped 15 basis points to 5.54%, while the percentage of loans for depository servicers decreased 2 basis points to 5.28%.

From forbearance to post-forbearance: How to make the process effective

To accommodate the large volume of loans still in forbearance, mortgage servicers must have functional, flexible and effective processes in place. Here are some actionable steps to create that process.

Presented by: FICS

The MBA’s survey found that of the cumulative exits between June 1, 2020, and Feb. 14, 27.9% of borrowers continued to make their monthly payments during the forbearance period while over 15% of exits represented borrowers who did not make all of their monthly payments and exited forbearance without a loss mitigation plan in place.

Overall, the MBA noted that new forbearance requests are also falling – down six basis points to match a survey low.

“The housing market is quite strong, with home sales, home construction, and home price data all testifying to this strength,” Fratantoni said. “Policymakers and the mortgage industry have helped enable this during the pandemic by providing millions of homeowners support in the form of forbearance.”

In the week prior, forbearance was once again extended by the Biden administration, pushing out forbearance and eviction moratoriums an additional three months, through June 30, 2021. This measure only applies to those with a loan backed by the FHA, though Fannie and Freddie recently extended forbearance requests up to 15 months.

Now, data is showing the affects of long-standing moratoriums. Black Knight’s December mortgage monitor report revealed foreclosure starts hit a record low in 2020, falling by 67% from the year prior as moratoriums and forbearance plans protected homeowners.

Based on the rate of improvement to date, Black Knight estimates there could be more than 2.5 million active forbearance plans remaining at the end of March 2021 when the first wave of plans reaches their 12-month expirations.

For four months now, the forbearance portfolio volume has hovered between 5% and 6% — the longest a percentage range has held since the survey’s origins in May.
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