Forbearances fall below 1% at Fannie Mae and Freddie Mac

Forbearance exits slowed from their previously accelerated pace in the past week, but the number of distressed loans held by Fannie Mae and Freddie Mac slipped below 1% for the first time since March 2020, the Mortgage Bankers Association reported.

The share of borrowers in forbearance fell to 2.15% of current total servicing volume for the week ending Oct. 24, according to the MBA’s weekly Forbearance and Call Volume Survey. The decline represents a six-basis-point decrease from 2.21% a week earlier. The MBA’s sample for this week’s survey included 47 servicers, representing 36.7 million loans, or 73% of the first-loan servicing market.

As recently as Sept. 12, more than 3% of all mortgages were in a forbearance plan, and the expiration of COVID-related protections led to a sharp decrease of the share in early October. Borrowers are expected to roll off the plans in higher numbers again soon, said Mike Fratantoni, MBA’s senior vice president and chief economist. “With so many borrowers having reached the end of their 18-month forbearance term, we expect a steady pace of exits in November.” he said in a press statement.

Although the mid-month drop was muted compared to previous weeks, it contributed to a milestone, with the number of forborne loans backed by Fannie Mae and Freddie Mac dipping below the 1% threshold to 0.97% of GSE total volume. Seven days earlier, the share stood at exactly 1%.

The decline among GSE loans was similar to drop-offs in other major loan pools. The share of Ginnie Mae securitized loans in forbearance slid to 2.65% of volume, down from 2.72% the week prior, while the percentage of distressed mortgages in portfolios or private-label securities dropped eight basis points to 5.13% from 5.21%. Portfolio and PLS loans in forbearance — which received fewer government protections during the COVID pandemic than GSE and Ginnie loans —now outnumber those from other investor types at both independent mortgage banks and depository institutions.

The share of distressed mortgages at both IMBs and depository banks relative to their overall volumes decreased for the week. Loans in forbearance account for a 2.43% share at IMBs and 2.07% within depositories, dropping from 2.49% and 2.11%.

During the most recent weekly period, 18.1% of those exiting forbearance plans left with no loss-mitigation plan in place, up from 17% a week earlier. Another 25.8% accepted a modification or combo, increasing from 25.1% week over week, while 35.6% opted for a payment deferral, compared to 40.8% in the prior period. Those who paid off their mortgage equaled 6.4%, up from 4.8%, and 6.6% of borrowers had remained current in their mortgage payments while in forbearance, up from 6.4%.

Servicers reinstated 4.6% of borrowers, down from 5.1% the previous week, and 2.8% accepted a repayment plan, up from 0.4% seven days earlier. The remaining 0.11% exited through other means, including short sales and deed of lieu, compared to 0.15% a week earlier.

Since June 2020, an average of 16.7% of forborne borrowers have exited forbearance with no loss-mitigation plan in place. But that share between Oct. 4-24 has increased to 21.7%.

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