Forbearance totals nudge downwards as more plans come up for review

The number of homeowners in forbearance has declined slightly, showing slow improvement in the past few weeks as the industry waits to see the outcome of more than 200,000 additional reviews in the final days of June.

For the weekly period ending June 29, approximately 146,000 plans in Covid-related forbearance were reviewed for removal or extension. Of those, 44,000 were removed from their plans, with 102,000 granted extension, according to Black Knight.

“All in all, we wound up with a net decline of 6,000 plans,” noted Andy Walden, Black Knight’s economist and vice president of market research, in a written statement. “Not overly impactful, but it does set us up nicely for what could be a larger improvement next week as some 218,000 plans were still scheduled for review by Wednesday, June 30.”

Provisions of the CARES Act permitted borrowers to enter COVID-related forbearance for up to 18 months. Many who entered these programs in the first weeks they were offered underwent final quarterly reviews in June before their plans become due to expire later this year.

In total, 2.051 million plans remained in forbearance, down from 2.057 million a week earlier, accounting for a 3.9% share of overall mortgages. The current figure represents a decrease of 145,000 from a month ago, a 6.6% drop. The rate of improvement was a pick-up from the two prior weeks showing forbearance numbers declining by 6% and 5.4%.

Weekly forbearance improvement occurred among both GSE-backed and government-sponsored loan types. Fannie Mae and Freddie Mac-sponsored mortgages shed the highest number of plans — 5,000, decreasing to 626,000 from 631,000 the week before. Forborne loans backed by the Federal Housing Authority or Veterans Administration fell to 827,000 from 829,000.

But a rise of forborne portfolio and private-label securitized loans offset those improvements. Portfolio and PLS loans, which were not protected under the CARES Act, increased by 1,000 from the prior week — to 598,000 from 597,000.

The unpaid balance among loans in forbearance totaled $401 billion, down from $403 billion one week earlier. Of that amount, $130 billion were backed by Fannie Mae or Freddie Mac, $141 billion were in government-sponsored mortgages and $131 billion in portfolio or PLS loans.

The declining number of new starts — 9% fewer over the last four weeks than in the preceding four-week period, according to Walden — was also welcome news, even as the Mortgage Bankers Association found in its data that forbearance re-entries had climbed.

The uptick of re-entries reported by the MBA could point to signs of persistent underemployment or inconsistent income among homeowners since the beginning of the pandemic. But June jobs data released on Friday by the U.S. Bureau of Labor and Statistics shows promising developments on that front that could bear out in forbearance reports this summer.

“Fewer workers reported working part-time for economic reasons, suggesting that they may now have full-time jobs,” said Mike Fratantoni, MBA senior vice president and chief economist. “And the number of workers reported as ‘job leavers’ increased, lining up with the higher quit rate seen in other data.”