The Mortgage Bankers Association’s recent Loan Monitoring Survey reveals a decline in the number of loans under forbearance, suggesting a subtle shift in the current economic landscape. The survey, released this month, noted a 2 basis points decrease in loans under forbearance, from 0.33% in August to 0.31% at the close of September 2023.
Based on these figures, the current count of homeowners in forbearance stands at 155,000. Since March 2020, mortgage servicers have granted forbearance to an estimated 8 million borrowers.
Breaking down the statistics, the forbearance share for Fannie Mae and Freddie Mac loans dipped by 1 basis point, ending at 0.18%. Ginnie Mae loans saw a more pronounced drop of 8 basis points, settling at 0.57%. Meanwhile, portfolio loans and private-label securities (PLS) observed a decrease of 4 basis points, wrapping up September at 0.35%.
“The number of loans in forbearance dropped in September, but the overall performance of servicing portfolios and loan workouts declined slightly,” said Marina Walsh, CMB, MBA’s vice president of industry analysis. “MBA’s baseline forecast has a recession in the first half of 2024. Several factors – including unemployment increases, rising property taxes and insurance, the resumption of student debt payments, and possible natural disasters – may affect loan performance in future months.”
More than half (52%) of the borrowers in forbearance cited the COVID-19 pandemic as the reason, while 10.2% attributed their situation to natural disasters. Other causes, such as job loss, divorce, death, or disability, accounted for the remaining 37.8%.
In terms of the forbearance stage, 42.7% of total loans are in the initial phase. Almost half (48.9%) are undergoing a forbearance extension, while the remaining 8.4% consist of forbearance re-entries and extensions.
Upon exiting forbearance, 29.4% resulted in a loan deferral or partial claim. Remarkably, 17.8% of borrowers continued to make regular payments during their forbearance period. However, 18.2% left forbearance without a loss mitigation plan in place.
The loan performance in September also revealed a slight drop in the total number of current serviced loans (neither delinquent nor in foreclosure). This number decreased from 96.09% in August to 95.83% in September. Washington, Colorado, Idaho, Oregon, and California stood out as states with the highest percentage of current loans, while Louisiana, Mississippi, Indiana, New York, and Ohio were at the lower end.
Despite the promising reduction in forbearance, the dip in loan performance and looming economic challenges emphasize the need for vigilance in the mortgage industry.
