Mortgage forbearances dip to lowest point since April

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The total number of mortgages in forbearance continued its downtrend, sinking below 4 million for the first time since the end of April, according to Black Knight.

As of Aug. 10, an estimated 3.93 million mortgages sat in forbearance plans, falling 71,000 from just over 4 million one week earlier. The share of loans in active forbearances edged down to 7.4% from 7.5%.

By investor type, the number of forborne government-sponsored enterprise conforming mortgages dropped by 27,000 to 1.515 million, as the share fell to 5.4% from 5.5%. Federal Housing Administration and Veterans Affairs loans decreased by about 8,000 units to 1.394 million and the share crept down a tenth of a percentage point to 11.5%. Portfolio and private-label mortgages in a plan took the largest dive, declining 36,000 units to 1.021 million and to 7.9% from 8.1% over the week.
"Federally backed loans have been more flexible — they don’t require lump-sum payments if a borrower can’t afford it — but until that becomes a norm across all mortgages, forbearance remains a modest benefit to many homeowners,” Christopher Morrison, COO of States Title, said in a statement.

Unpaid principal balance from the forborne mortgages accounts for approximately $834 billion in, down from $852 billion the previous week.

The latest Black Knight estimates show mortgage servicers will need monthly advances of $4.8 billion in principal and interest payments and an additional $1.8 billion due in taxes and insurance. Those break down to $1.7 billion and $700 million for Fannie Mae and Freddie Mac mortgages, $1.3 billion and $500 million for FHA and VA, and $1.7 billion and $600 million for private-label.

These drops paint a positive outlook on the surface but are more indicative of the CARES Act helping borrowers rather than true economic recovery, according to Morrison.

"For many people, the CARES Act provided a liquidity benefit for a limited amount of time, but they are still responsible for payments due in lump-sum immediately after their forbearance period is up," Morrison said. "This doesn’t fundamentally change things for many borrowers, especially if they’ve been laid off or furloughed as a result of COVID-19."

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