The U.S. forbearance rate measuring the share of mortgages with suspended payments increased for the first time in nearly five months from 5.47% to 5.48%, according to the Mortgage Bankers Association. The U.S forbearance rate has either fallen or remained flat since forbearances decreased for the first time in the series history on June 22.
According to the MBA, last week’s increase was largely driven by an imbalance of more people entering than exiting forbearance plans.
The forbearance rate for Ginnie Mae loans, which include loans backed by the Federal Housing Administration, gained 3 basis points to 7.73%. The forbearance share for portfolio loans and private-label securities (PLS) increased by 10 basis points to 8.48%, while the percentage of loans in forbearance for depository servicers increased 1 basis point to 5.44%.
The percentage of loans in forbearance for independent mortgage bank (IMB) servicers remained unchanged from the week prior at 5.94%.
Fannie Mae and Freddie Mac provided a silver lining, as GSE loans in forbearance dropped for the 24th week in a row to 3.35%. That 1 basis point improvement marked the sixth straight month of forbearance decline for the GSEs, said Mike Fratantoni, MBA’s senior vice president and chief economist.
“A marked slowdown in forbearance exits, as well as a slight rise in the share of Ginnie Mae, portfolio, and PLS loans in forbearance, led to an overall increase for the first time since early June,” said Fratantoni. “The decline in exits in the prior week follows a flurry of them last month, when many borrowers reached the six-month point in their forbearance terms.”
Sutherland Mortgage Services President Krish Swaminathan discusses the next wave of servicing, how servicers can best communicate with their customers and the technology available to help with compliance, even in a work-from-home environment.
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But many borrowers are still taking advantage of the extensions provided to them even as they reach the initial six-month term. According to the report, 76.76% of total loans in forbearance were in some sort of extension, up from 76.4% the week prior.
The remaining loans in forbearance were made up of 21.32% in the initial phase while 1.92% are forbearance re-entries.
Overall, the MBA estimates 2.7 million homeowners are still in some form of mortgage forbearance.
Last week, Fratantoni urged borrowers to contact their servicers for relief and access to options. However, for the third week in a row, the number of borrowers who did not make all of their monthly payments and exited forbearance without a loss mitigation plan in place rose to 12.9% from 12.8% the week prior. That number encompasses those who have exited forbearance from the period of June 1 through Nov. 1.
Of the cumulative forbearance exits for the same time period, 30.5% were borrowers who continued to make their monthly payments during their forbearance period. That number is down from 30.6% reported in the week prior.
Despite the slight uptick in forbearances, Fratantoni noted incoming housing market data has shown resilience reflected in existing-home sales for October reaching their fastest pace since 2005
“However, renewed weakness in the latest job market data indicate that many homeowners are continuing to experience severe hardships due to the pandemic and still need the support that forbearance provides,” Fratantoni said.
But that deadline is fast approaching. The housing industry is a little over a month away now from its cutoff for single-family homeowners to request forbearance through Dec. 31, 2020, for loans backed by the FHA and the Federal Housing Finance Agency – the same day the foreclosure moratoria are also set to expire.