Fannie and Freddie forbearances drop to lowest level since March 2020

The number of mortgages in coronavirus-related forbearance decreased for the 18th consecutive week, dropping 4 basis points between June 21 and June 27, according to the Mortgage Bankers Association.

Home loans in forbearance plans represent 3.87% of all outstanding mortgages, about 1.9 million homeowners. That reflects a decline from 3.91% the week earlier and the lowest level since 3.74% on April 5, 2020. The shares of forborne loans at independent mortgage bank servicers and depositories both fell 3 basis points to 4% and 4.11%, respectively.

“Strong job growth in June should provide a springboard for further improvements in the forbearance numbers over the next month,” Mike Fratantoni, senior vice president and chief economist of the MBA, said in a press release. “The rate of forbearance exits and new forbearance requests remained at low levels, but we expect the pace of exits to increase with reporting next week for the beginning of July.”

Government-sponsored entities saw the greatest decrease loan distress, dipping to 1.99% from 2.02%. It represents the first time Fannie Mae and Freddie Mac forborne mortgages got under the 2% mark since March 2020.

Ginnie Mae loans — composed of Federal Housing Administration, Department of Veterans Affairs and U.S. Department of Agriculture Rural Housing Service products — fell to 5.1% from 5.13%. Private-label securities and portfolio loans — products not addressed by the coronavirus relief act — dropped to 7.92% from 7.97%.

Of all the exits through June 27, 2021 from June 1, 2020, 27.9% ended in deferral or partial claim, 23.8% continued to make their monthly payments, 15.2% exited without a loss mitigation plan, 13.7% were reinstatements, 10.4% modified their loans, 7.5% paid through refinance or sale, and 1.5% entered a repayment plan, short sale, or a deed-in-lieu.

A 10.8% share of all forborne mortgages sit in the initial forbearance stage, 82.9% shifted to extended plans and the remaining 6.3% re-entered forbearance after exiting previously.

Forbearance requests as a percentage of servicing portfolio volume held at 0.04% from the prior three weeks. Call center volume as a percentage of portfolio volume fell to 5.9% from 7.2%.

The MBA's sample for this week's survey includes a total of 48 servicers with 25 independent mortgage bankers and 21 depositories. The sample also included two subservicers. By unit count, the respondents represented about 74%, or 37 million, of outstanding first-lien mortgages.