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Forbearances Fall With Job Market in Recovery Mode

With approximately 2.1 million homeowners currently in forbearance plans, the share of loans in forbearance is down for the 12th consecutive week, as the latest Mortgage Bankers Association (MBA) Forbearance and Call Volume Survey finds the total number of loans now in forbearance decreased by three basis points from 4.22% of servicers’ portfolio volume in the prior week to 4.19% as of May 16, 2021.

By investor type, the share of Fannie Mae and Freddie Mac loans in forbearance also decreased three basis points from 2.24% to 2.21%. Ginnie Mae loans in forbearance decreased two basis points from 5.61% to 5.59%, while the forbearance share for portfolio loans and private-label securities (PLS) remained the same relative to the prior week at 8.26%. The percentage of loans in forbearance for independent mortgage bank (IMB) servicers decreased four basis points to 4.38%, and the percentage of loans in forbearance for depository servicers remained the same at 4.35%.

“The share of loans in forbearance declined for the 12th straight week, dropping by three basis points. The decline was smaller than the prior week due to a slower pace of forbearance exits,” said Mike Fratantoni, MBA’s SVP and Chief Economist. “Although the overall share is declining, there was another increase in forbearance re-entries. Currently, 5.3% of loans in forbearance are homeowners who had cancelled forbearance, but needed assistance again.”

With unemployment numbers showing signs of recovery, the industry is expecting more and more exiting forbearance plans nationwide as the June 30, 2021 deadline for foreclosure moratoria nears. In the week ending May 15, the U.S. Department of Labor reported initial unemployment claims at 444,000, a decrease of 34,000 from the previous week’s level, marking the lowest level for initial claims since March 14, 2020 at the outset of the pandemic when initial unemployment claims stood at 256,000.

“The job market is recovering, but the pace of recovery thus far is slower than we had forecasted,” said Fratantoni. “Continued job growth is needed to help more struggling homeowners get back on their feet.”

By stage, 11.8% of the total loans in forbearance were in the initial forbearance plan stage, while 82.9% were in a forbearance extension. As previously noted by Fratantoni, the remaining 5.3% were forbearance re-entries.

Of the cumulative forbearance exits for the period from June 1, 2020, through May 16, 2021:

  • 27.2% resulted in a loan deferral/partial claim.
  • 24.8% represented borrowers who continued to make their monthly payments during their forbearance period.
  • 15.0% represented borrowers who did not make all of their monthly payments and exited forbearance without a loss mitigation plan in place yet.
  • 14.1% resulted in reinstatements, in which past-due amounts are paid back when exiting forbearance.
  • 9.9% resulted in a loan modification or trial loan modification.
  • 7.4% resulted in loans paid off through either a refinance or by selling the home.
  • The remaining 1.6% resulted in repayment plans, short sales, deed-in-lieus or other reasons.

Black Knight recently reported a 7.11% dip in mortgage delinquencies in April 2021, pulling the delinquency rate down to less than 5% for the first time since the start of the pandemic.

“As the economy gets back on track, we’re churning through a lot of the distressed inventory of mortgages,” Black Knight said in a recent release. “At the current rate of improvement, overall delinquencies should be back to pre-pandemic levels by the end of 2021.”

In terms of servicer call center volume, the MBA reported calls increasing over the previous week from 8.0% to 8.4%, with the average call length decreasing from 7.9 minutes to 7.7 minutes.