What the CFPB’s servicing report says about COVID forbearance requests

The share of delinquent borrowers who did not ask for forbearance ranged from 10% or less to more than 50%, a new study of 16 large servicers by the Consumer Financial Protection Bureau shows.

“For private loans, the rates of delinquent loans for borrowers who never requested COVID-19 hardship forbearances during the pandemic were higher — exceeding 50% for some servicers,” the bureau’s report on pandemic response metrics said.

Borrowers with private loans don’t have the same right to long-term forbearance federally-backed loans have and if their mortgages are in securitizations, their options may be limited by loan pooling and servicing agreements governing those transactions.

However, one bank working with a subservicer on federally-backed mortgages also reported double-digit highs in the 38-44% range, according to the study.

The findings are a reminder that while the majority of delinquent borrowers are in forbearance plans, there’s a wide range of outcomes by servicers and loan types. Overall, delinquency rates varied widely in the study at 1% to 26%, with the highest reported by the subprime servicer that participated. The average in the CFPB’s study for the period between December 2020 and April 2021 was 5 to 13%.

Delays in consumer assistance may be contributing to the fact that some of these delinquent borrowers have gone without forbearance, the study suggested.

Call hold time in the CFPB’s study ranged from an average of almost three minutes to a maximum of more than 26. Abandonment rates ranged from less than 5% to 34%.

The report flagged an increase in the number of borrowers who remained late on their payments after they exited their payment suspension plans.

The share of borrowers that exited forbearance delinquent in aggregate was in the 10% to 30% range for both federally-backed and private loans. However, for one servicer specializing in borrowers with subprime credit it was approximately 60%. A couple of servicers also had delinquent exit rates above 50% for private loans.

Delinquencies upon exits from forbearance are becoming a more pressing concern for borrowers due in part to the fact that forbearance terms are expiring. In addition, the federal foreclosure ban technically ended July 31, and it is effectively being phased out by new consumer protections the CFPB is putting in place at the end of this month. A bridge measure enacted by the Federal Housing Finance Agency made them effective for many loans starting this month, and some federal officials have pressed for early adoption of the rule to be more broadly applied.