As mortgage forbearance rate continues to decline, MBA advises caution

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The pace of mortgages going into forbearance declined for the seventh week in a row, but a rise in coronavirus cases could stop that momentum, the Mortgage Bankers Association reported. Pandemic-related forbearances fell 7 basis points between July 20 and July 26, according to the organization's latest report.

Approximately 7.67% of all outstanding loans — or about 3.8 million — sat in forbearance plans compared to 7.74% and nearly 3.9 million the week before. The share of forborne loans at independent mortgage bank servicers declined to 7.81% from 7.85%, while depositories dropped to 7.95% from 8.06% over the same period.

"We are now seeing a notable pattern developing over the past two weeks. The forbearance share is decreasing for GSE loans but has slightly increased for Ginnie Mae loans," Mike Fratantoni, the MBA's senior vice president and chief economist, said in a press release.

The forbearance share of conforming mortgages — those purchased by Fannie Mae and Freddie Mac — fell to 5.41% from 5.49%. Ginnie Mae loans — Federal Housing Administration, Department of Veterans Affairs and U.S. Department of Agriculture Rural Housing Service products — edged up 1 basis point to 10.28%.

Private-label securities and portfolio loans — products not addressed by the coronavirus relief act — continued going up and down, this week dropping to 10.37% from 10.53%.

"The job market has cooled somewhat over the past few weeks, with layoffs increasing and other indications that the economic rebound may be losing some steam because of the rising COVID-19 cases throughout the country," Fratantoni said. "It is therefore not surprising to see this situation first impact the Ginnie Mae segment of the market. The higher level of Ginnie Mae loans in forbearance will increase the amount of payments that servicers must advance. We continue to monitor servicer liquidity during these challenging times."

Forbearance requests as a percentage of servicing portfolio volume decline to 0.1% after staying static at 0.13% for three weeks, while call center volume as a percentage of portfolio volume cut down to 6.7% from 9%.

The MBA's sample for this week's survey includes a total of 52 servicers including 27 independent mortgage bankers and 23 depositories. The sample also included two subservicers. By unit count, the respondents represented about 75%, or 37.3 million, of outstanding first-lien mortgages.

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