Mortgage forbearances drop by largest amount since CARES Act passed
The number of mortgage borrowers currently in a forbearance plan had its single largest week-to-week drop, as many plans scheduled to terminate in June were not renewed, Black Knight said.
"This latest decline in the number of homeowners in active forbearance is an encouraging sign of continued improvement," Andy Walden, economist and director of market research for Black Knight, said in a statement. "The reduction of roughly 435,000 — the largest single-week drop yet — was driven at least in part by the fact that more than half of all active forbearance plans entering the month were set to expire at the end of June. While the majority of those have been extended, this week's data suggests a significant share were not."
Servicers of conforming and government-guaranteed loans were mandated by the initial government relief package to offer residential borrowers a forbearance, and then an extension, if asked for. There are no federal requirements for portfolio and private-label mortgages, but some states have put in their own rules for them.
There are 4.14 million homeowners in a forbearance plan, or 7.8% of all mortgages, as of July 7, Black Knight said. This compares with 4.57 million borrowers or 8.6% of mortgages one week prior. It is the fewest number of active plans since April 28, a Black Knight blog noted.
Conforming mortgages had the largest week-to-week drop in forbearances, at 200,000, slightly less than half of the total. There were 136,000 fewer portfolio and private-label loans in forbearance, while the number of government-guaranteed loans fell by approximately 93,000.
By share, only 6% of Fannie Mae and Freddie Mac mortgages are in forbearance, compared with 11.6% of government-guaranteed loans and 8.2% of private-label mortgages.
A separate report from mortgage subservicer Specialized Loan Servicing found that 27% of its borrowers in forbearance had made their mortgage payments in June. This is up from 25% in May, with 27% doing so in April and 39% in March.
"It's likely that some borrowers requested forbearance in anticipation of financial difficulties which did not materialize or were not as demanding as they expected, meaning that they were in a better position to make a payment," said Tom Millon, the CEO of Computershare Loan Services US, the parent company of SLS. "Our data also show that some borrowers could pay their mortgage, but they went into forbearance as a method to conserve cash likely as a result of the uncertainty brought on by the pandemic."
The view from mortgage insurers
Another sign of a positive shift: both Radian and MGIC reported new delinquency notices received from servicers were lower in June compared with May.
Radian received 20,862 notices in June, down from 35,915 in May. In April, it got 6,228. Since notices are generated when a borrower misses two payments, these likely came from borrowers already in distress.
Between April 1 and June 30, Radian's delinquent inventory — new notices minus loans where the borrower starts paying again and claims paid on foreclosures — grew from 19,781 to 69,742 loans.
MGIC reported 19,358 new notices of delinquency in June, compared with 31,117 in May and 7,109 in April.
During the second quarter, MGIC's inventory more than doubled from 27,348 to 69,326. For June, 80% of the new notices were for forborne loans; two-thirds of the inventory was in a plan.
For National MI, which opened for business after the housing bubble burst, the delinquent portfolio rose to 10,816 loans or a default rate of 2.9% on June 30 from 1,448 loans or 0.38% on March 31.
Unlike Radian and MGIC, most of National MIs new notices were received in June, at 8,551.
The other MI created after the bubble burst, Essent, reported its delinquent loan inventory grew to 38,060 on June 30, from 27,353 on May 31. During June, it received 13,579 new notices.
Approximately 5.2% of its insured loans were in default at the end of June, Essent said in a Securities and Exchange Commission filing.