Forbearance rate tumbles downward as jobs pick up

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After a moderate decline of 7 basis points the week before, the number of mortgages in coronavirus-related forbearance fell 16 basis points between Oct. 19 and 25, according to the Mortgage Bankers Association.

Home loans in forbearance plans represent 5.67% — approximately 2.8 million homeowners — of all outstanding mortgages, down from 5.83% and 2.9 million a week earlier. The share of forborne loans at independent mortgage bank servicers decreased to 6.19% from 6.27%, while depositories fell to 5.6% from 5.86%.

“With declines in the share of loans in forbearance across the board, the data this week align well with the positive news from October’s jobs report, which showed a gain of more than 900,000 private sector jobs, and a 1 percentage point decrease in the unemployment rate,” Mike Fratantoni, the MBA’s senior vice president and chief economist, said in a press release. “A recovering job market, coupled with a strong housing market, is providing the support needed for many homeowners to get back on their feet.”

Forbearances fell at every loan type but conforming mortgages — those purchased by Fannie Mae and Freddie Mac — continued leading the recovery. This contingent decreased for the 22ndstraight week to 3.49% from 3.66%.

Forbearance in Ginnie Mae loans — Federal Housing Administration, Department of Veterans Affairs and U.S. Department of Agriculture Rural Housing Service products — slipped to 7.95% from 8.13%. Private-label securities and portfolio loans in forbearance — products not addressed by the coronavirus relief act — went down to 8.7% from 8.82%.

CARES Act expirations are responsible for many forbearance exits, opening possible issues for servicers to patch up.

“Servicers are still having difficulties reaching borrowers who have reached the six-month point of their forbearance period,” Fratantoni said. “Servicers are required to get borrowers’ consent to extend forbearance beyond six months. Homeowners who continue to be impacted by hardships related to the pandemic should contact their servicer.”

A 22.25% share of all forborne mortgages sit in the initial forbearance stage while 75.99% shifted to extended plans and the remaining 1.76% re-entered forbearance after exiting previously.

Forbearance requests as a percentage of servicing portfolio volume held from the week previous at 0.1%. Call center volume as a percentage of portfolio volume rose to 8.1% from 6.7%.

The MBA’s sample for this week’s survey includes a total of 50 servicers with 26 independent mortgage bankers and 22 depositories. The sample also included two subservicers. By unit count, the respondents represented about 74%, or 37.2 million, of outstanding first-lien mortgages.

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Loss mitigation Distressed CARES Act Mortgage Bankers Association Coronavirus FHA Fannie Mae Freddie Mac Ginnie Mae Employment data