Forbearance Rate Drops 34 BPS

The latest Mortgage Bankers Association (MBA) Forbearance and Call Volume Survey revealed that the total number of loans in forbearance decreased by 34 basis points from 2.62% of servicers' portfolio volume the previous week to 2.82% for the week ending on October 10, 2021. The MBA survey estimates there are 1.1 million homeowners currently in forbearance plans. 

“Forbearance exits continued at an even more robust pace, resulting in a 34 basis-point decline in the overall forbearance rate. The decline was apparent across all servicer types and investor types,” said Mike Fratantoni, MBA's senior vice president and chief economist. “There was a substantial drop of over 1 percentage point in the forbearance rate for portfolio and PLS loans, which includes loans held for investment purposes, loans serviced for private investors, and government loans that were bought out of Ginnie Mae pools for the purposes of modifying them and then re-securitizing them into Ginnie Mae pools.”

The share of Fannie Mae and Freddie Mac loans in forbearance dropped to 1.05% or 16 basis points. Ginnie Mae loans in forbearance dropped to 2.77% or 17 basis points. The forbearance share for portfolio loans and private-label securities (PLS) fell by 108 basis points to 5.34%. Meanwhile, the percentage of loans for independent mortgage banks (IMB) servicers decreased by 25 basis points to 2.57% within one week. For depository servicers, the percentage of loans in forbearance fell 53 basis points to 2.16%. 

Broken down by stages, 14.8% of total loans in forbearance are in the initial forbearance stage, meanwhile 75.5% are in the forbearance extension stage. The remaining 9.7% are forbearance re-entries. 

“We are now down to 1.1 million homeowners in forbearance from a peak of 4.3 million homeowners in June 2020,” Fratantoni added. “Positive employment and wage prospects, continued home-price appreciation, and the availability of multiple loan workout options are factors that will smooth many homeowners' transition out of forbearance.”

Out of the cumulative forbearance exits from June 1, 2020, through October 10, 2021, 28.9% resulted in a loan deferral/partial claim. Roughly 20% continued to make monthly payments during the forbearance period, meanwhile 16.7% did not make all their monthly payments and exited forbearance without a loss mitigation plan. Nearly 13% resulted in a loan modification or trial loan modification. About 12% resulted in reinstatements, in which the past due amount is paid back when exiting forbearance. The remaining 7.1% resulted in loans paid off through refinance or selling the house, and 1.4% resulted in repayment plans, short sales, deed-in-lieus or other reasons.