Forbearances drop to lowest level since April 2020

The past year of frenzied housing activity and economic recovery drove forbearances back down to levels not seen since the CARES Act came into effect, according to the Mortgage Bankers Association.

The number of mortgages in coronavirus-related forbearance dropped for the 16th week in a row, falling 11 basis points between June 7 and June 13.

Home loans in forbearance plans represent 3.93% — about 2 million homeowners — of all outstanding mortgages, down from 4.04% the week earlier. It’s the lowest forbearance rate since 3.74% on the week ending April 5, 2020. The share of forborne loans at independent mortgage bank servicers declined to 4.05% from 4.21% and depositories inched down to 4.16% from 4.19%.

“More than 44% of borrowers who exited this week used a deferral plan, highlighting the importance of this option,” Mike Fratantoni, MBA SVP and chief economist, said in a press release. “As more homeowners reach the end of their forbearance term, we should continue to see the share in forbearance decline. The improving job market and strong housing market are providing support for those who do exit.”

Of all the exits through June 13, 2021 from June 1, 2020, 27.6% ended in deferral or partial claim, 24.1% continued to make their monthly payments, 15.3% exited without a loss mitigation plan, 13.8% were reinstatements, 10.2% modified their loans, 7.5% paid through refinance or sale, and 1.5% entered a repayment plan, short sale, or a deed-in-lieu.

Each investor type saw weekly improvement in their forborne mortgage shares. Ginnie Mae loans — composed of Federal Housing Administration, Department of Veterans Affairs and U.S. Department of Agriculture Rural Housing Service products — decreased 5.15% from 5.22%.

Conforming mortgages — those purchased by Fannie Mae and Freddie Mac — continue leading the overall recovery, with their percentage of loans in forbearance falling to 2.05% from 2.09%. The share of forborne private-label securities and portfolio loans — products not addressed by the coronavirus relief act — plummeted to 7.98% from 8.33%.

A 10.6% share of all forborne mortgages sits in the initial forbearance stage, while 83.5% shifted to extended plans, while the remaining 5.9% re-entered forbearance after exiting previously.

Forbearance requests as a percentage of servicing portfolio volume held at 0.04% from the prior week. Call center volume as a percentage of portfolio volume increased to 7% from 6.9%.

The MBA's sample for this week's survey includes a total of 48 servicers with 25 independent mortgage bankers and 21 depositories. The sample also included two subservicers. By unit count, the respondents represented about 74%, or 37 million, of outstanding first-lien mortgages.