The U.S. forbearance rate is officially below 5% for the first time in a year. Servicers’ forbearance portfolio volume fell nine basis points last week to 4.96%, according to a survey from the Mortgage Bankers Association.
Since October, the percentage of portfolio loans in forbearance hovered between 5% and 6%, the longest a percentage range had held since the survey’s beginning as continuous extensions gave homeowners more time to postpone payments.
According to the MBA, new forbearance requests last week remained at their lowest level since last March, while the pace of exits increased and shrunk the share of loans in forbearance across all investor categories. Fannie Mae and Freddie Mac loans boasted the smallest percentage once again, dropping to 2.77% – a six-basis-point improvement.
Ginnie Mae‘s forbearance share dropped 20 basis points last week to 6.83%, it’s third week of double-digit declines, while portfolio loans and private-label securities (PLS) managed a one basis point drop to 8.9%.
Continued downward trends mark a positive sign for the larger economic picture, but the MBA still estimates 2.5 million homeowners are taking advantage of some form of forbearance, and now, more than 17% of borrowers in forbearance extensions have exceeded the original 12-month mark set by servicers and agencies.
“Many homeowners need this support, even as there are increasing signs that the pace of economic activity is picking up as the vaccine rollout continues,” said Mike Fratantoni, MBA’s senior vice president and chief economist. “Those who have an ongoing hardship due to the pandemic and want to extend their forbearance beyond the 12-month point need to contact their servicer. Servicers cannot automatically extend forbearance terms without the borrower’s consent.”
According to a recent report from Black Knight, at the current rate of improvement, an estimated 600,000 plans should have reached their original 12-month forbearance expiration at the end of this month (the peak month for expiration activity). Next week’s data should be informative, given both HUD and the FHFA pushed expirations to the end of September 2021 for the first round of forbearance seekers.
After seeing significant monthly declines early in the pandemic, the rate of improvement among these early forbearance enrollees has dropped to -3% per month, suggesting borrowers who have remained in their plans for an extended period may be much more likely to remain in those plans for the full duration rather than exiting early.
Of the cumulative forbearance exits for the period from June 1, 2020, through March 21, 2021, 26.9% represented borrowers who continued to make their monthly payments during their forbearance period, however, that number has slowly decreased for months now. On the other end of the spectrum, the number of borrowers who did not make all of their monthly payments and exited forbearance without a loss mitigation plan in place, is nearing 15%.