Forbearances numbers decline to 3% of servicing volume

Borrowers continued to exit forbearance plans at a heightened pace, keeping up momentum generated a week earlier, based on the latest numbers from the Mortgage Bankers Association.

The volume of mortgages in forbearance came in at 3% of all serviced loans for the period of Sept. 6 to 12, an eight-basis point drop from 3.08% the previous week, according to the MBA’s Forbearance and Call Volume Survey. The latest decrease comes after a 15-point decline earlier in the month, as several hundred thousand forbearance plans come up for review in September, likely leading to further reductions. The MBA estimates that approximately 1.5 million borrowers are currently in forbearance.

“20% of loans in forbearance are either new forbearance requests or re-entries,” said Mike Fratantoni, MBA’s senior vice president and chief economist. “At this point, borrowers in forbearance extensions are exiting at a faster rate as they near — or reach — the expiration of their maximum forbearance term.”

The percentage of distressed loans accounted for 3.25% of the servicing portfolio volume at independent mortgage banks, down from 3.33% a week earlier. Within depository institutions, forbearances fell to 3.1% of total servicing volume from 3.15% the prior week.

Among current forborne borrowers, 11.3% are in their initial stage of forbearance, while 80.2% remain in extensions. Re-entries accounted for 8.5% of all plans.

Millions of borrowers entered COVID-19 related forbearance plans thanks to the passage of the CARES Act in March 2020, and subsequent legislation allowed two six-month extensions. The first wave of borrowers in COVID-related forbearance requiring the full 18 months of relief are now approaching the end of protections.

Portfolio and private-label securitized loans, however, were not covered by the federal relief mandate, and their forbearance numbers have experienced varying degrees of fluctuations over the past 18 months. Portfolio and PLS loans showed a 32-basis point weekly drop to 6.95% from 7.27%, leading to the overall weekly decrease. Conventional mortgages backed by Fannie Mae and Freddie Mac also contributed to the dropping numbers, with forborne loans now accounting for a 1.47% share of volume at government-sponsored enterprises, down from 1.52% a week earlier. Mortgages in forbearance backed by Ginnie Mae posted the same share week over week at 3.39%.

Of distressed borrowers that had exited plans between June 1, 2020, and Sept. 12, 2021, 28.6% of them ended up in deferral or partial claim, and 21.9% belonged to homeowners who made regular payments while in forbearance. Another 16.4% left without a loss mitigation plan in place, while 12.7% were reinstatements. Loan modifications led to 11.6% of exits, and 7.4% were a result of either refinancing or the property’s sale. The remaining 1.4% ended in repayment plans, short sales or deed-in-lieus.
Requests for forbearances as a portion of overall servicing volume remained unchanged for the week at 0.5%, while servicer call-center activity dropped to 6.3% from 7.7% the previous week.

The MBA began its forbearance and call-center survey in April 2020 to track the number of distressed loans compared to pre-COVID benchmarks from March of that year. Survey data represents approximately 74%, or 36.8 million, of the first-mortgage servicing market. Ginnie Mae-backed mortgages accounted for 24.8% of current serviced loans, with 56.1% guaranteed by either Fannie Mae or Freddie Mac. The remaining share of 19.2% belonged to the PLS/portfolio segment.

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