Mortgage forbearance growth continues, but curve flattens

Total forbearance driven by the coronavirus rose by 25 basis points, which suggests it is still growing but at a slowing pace, according to the Mortgage Bankers Association.

About 4.1 million mortgages sat in forbearance plans between May 4 and May 10. Approximately 8.16% of all outstanding loans went into forbearance, compared to 7.91% the week before.

The share of loans in forbearance at independent mortgage bank servicers increased by more than the industry-wide average, growing by 31 basis points to 7.85% from 7.54% over that period. At depositories, that share increased to 8.99% from 8.75%.

"The pace of forbearance requests continued to slow in the second week of May, but the share of loans in forbearance increased," Mike Fratantoni, the MBA's senior vice president and chief economist, said in a press release. "There has been a pronounced flattening in loans put into forbearance — despite April's uniformly negative economic data, remarkably high unemployment, and it now being past May payment due dates. However, FHA and VA borrowers are more likely to be employed in the sectors hardest hit in this crisis, which is why more than 11% of Ginnie Mae loans are currently in forbearance."

Forbearance requests as a percentage of servicing portfolio volume declined 19 basis points for the week ended May 10 to 0.32% from 0.51%. Call center volume as a percentage of portfolio volume also fell to 7.8% from 8.6% the previous week.

Ginnie Mae mortgages — Federal Housing Administration, Veterans Affairs and U.S. Department of Agriculture Rural Housing Service products — claimed the highest percentage of loans in forbearance by investor type, rising to 11.26% from 10.96%.

Record-low mortgage rates, the refinance boom and a recent uptick in purchase applications suggest some aspects of the housing market could turn around as social distancing restrictions lift, but forbearance can impede borrowers' ability to refi or get a new loan.

"We will continue to closely monitor the forbearance request and call volume data for any sign of an uptick, but current trends suggest that if the economy continues to gradually reopen, the situation could be stabilizing," Fratantoni added.

The share of conforming mortgages, those purchased by Fannie Mae and Freddie Mac, in forbearance grew to 6.25% from 6.08%. The share of forbearance of private-label securities and portfolio loans — products which were not addressed by the coronavirus relief act — jumped to 9.26% from 8.88% the week prior.

The MBA's sample for this week's survey contains a total of 53 servicers consisting of 28 independent mortgage bankers, 23 depositories, plus two subservicers. By unit count, the respondents represented nearly 77%, or 38.3 million, of the outstanding first-lien mortgages.