Forbearance numbers unchanged, as relief for some borrowers soon ends

Servicers are gearing up for what they expect to be an active September, as August's slow pace led to few changes in forbearance numbers mid month.

Mortgages remaining in COVID-19-related forbearance plans clocked in at 3.25% of overall volume for the second consecutive week, according to the MBA’s Weekly Forbearance and Call Volume Survey for the period between August 16 and 22. The percentage represents approximately 1.6 million homeowners. Of that amount, 3.5% were held at independent mortgage banks, up from 3.48% the prior week, while the share of forborne loans at depository institutions stayed at 3.35% week-over-week.

Larger swings, though, are anticipated, according to Mike Fratantoni, MBA’s senior vice president and chief economist.

“We expect a sharp increase in forbearance exits over the next month as many borrowers reach the 18-month mark and see their forbearance plans end,” he said in a press release.

In the first few weeks that coronavirus protections were offered to homeowners last year through the CARES Act, forbearance requests climbed more than tenfold. Those thousands who were granted deferrals in March 2020 and still remain in forbearance will begin to see that relief expire in the coming weeks.

August’s data may give a hint to what next month’s numbers could bring. “For those borrowers who have exited in August, the majority either enter deferral plans or obtain modification,” Fratantoni noted.

Among loans that had already dropped out of forbearance between June 1, 2020, and August 22, 2021, 28.3% of them ended up in deferral or partial claim, and 22.5% belonged to borrowers who made regular payments while in forbearance. Another 16% exited without a loss mitigation plan in place, while 13.1% were reinstated. Loan modifications led to 11.2% of homeowners leaving forbearance, and 7.5% of exits were a result of either refinancing or the sale of the property. The remaining 1.4% ended in repayment plans, short sales or deed-in-lieus.

Forbearance shares with secondary mortgage lenders also barely budged. The number of forborne mortgages backed by Ginnie Mae stayed at 3.92% of volume week over week, while those held within Fannie Mae and Freddie Mac also remained unchanged at 1.66%. Distressed loans belonging to portfolio lenders and private-label securities increased three basis points to 7.18%, up from 7.15% the previous week.

Of current distressed borrowers, 10.2% are in their initial stage of forbearance, and 81.7% are in extensions. Forbearance re-entries equaled 7.7% of all forbearance plans.

Requests for forbearances as a portion of overall servicing volume remained unchanged for the week at 0.5%, and the call-center activity share fell a full percentage point down to 6.3% from 7.3% the prior week.

The MBA survey data represents approximately 74%, or 36.9 million loans, in the first-mortgage servicing market for the week. Ginnie Mae-backed mortgages accounted for 25.1% of loans serviced, with 56.4% guaranteed by either Fannie Mae or Freddie Mac. The remaining 18.5% share belonged to the PLS/portfolio segment.