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Mortgage Forbearance Rates Decline Further, Nearing Pre-Pandemic Levels

Christine Stuart
Sep 19, 2023

Mortgage Bankers Association’s Loan Monitoring Survey shows a decrease as homeowners recover from pandemic-related hardships.

The Mortgage Bankers Association says loans in forbearance continue their descent, decreasing by 6 basis points from 0.39% in July 2023 to 0.33% as of Aug. 31, 2023. This translates to roughly 165,000 homeowners still in forbearance plans.

This positive trend was evident across various loan types. Fannie Mae and Freddie Mac loans in forbearance saw a slight dip from 0.20% to 0.19%, Ginnie Mae loans experienced a more significant decline from 0.80% to 0.65%, and other loans, including portfolio and private-label security (PLS) loans, reduced from 0.45% to 0.39%.

“The forbearance rate is just 8 basis points shy of where it was at the beginning of March 2020, which indicates that most homeowners have recovered from the pandemic,” said Marina Walsh, CMB, MBA’s vice president of industry analysis. “While there was a monthly decline in the performance of post-forbearance workouts in August, overall mortgage servicing portfolios remain resilient. Compared to other credit types with weaker performance, the percentage of home mortgages that are performing is holding steady at a non-seasonally adjusted 96 percent.”

Of those in forbearance, 60.4% cite the COVID-19 pandemic as the primary reason, while natural disasters accounted for 7.2%. Other reasons, such as job loss, death, or divorce, contributed to the remaining 32.4%.

The study also shed light on the stages of forbearance. About 39.7% of the loans are in the initial forbearance phase, with 51.6% extending their forbearance. Only 8.6% are re-entering forbearance, which includes those extending it further.

In terms of forbearance exits from July 1, 2020, to August 31, 2023:

  • 29.5% resulted in loan deferral or partial claim.
  • 17.8% of borrowers continued monthly payments during forbearance.
  • 18.1% left forbearance without a mitigation plan in place.
  • 16.1% secured a loan modification or started a trial loan modification.
  • 10.8% repaid past-due amounts upon exiting forbearance.
  • 6.5% paid off their loans by refinancing or selling the home.
  • 1.2% adopted repayment plans or chose options like short sales or deed-in-lieus.
  • Highlighting the states, Washington, Idaho, Colorado, Oregon, and California have the highest shares of current loans. Meanwhile, Mississippi, Louisiana, Indiana, New York, and West Virginia have the lowest.

In August 2023, the total current loans, not in foreclosure or delinquency, accounted for 96.09% of serviced loans, marking an improvement from 96.02% in July 2023.

Since March 2020, mortgage servicers have extended forbearance to an estimated 7.92 million borrowers.

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