The pace of forbearance exits in December reached its lowest level since the Mortgage Bankers Association started tracking them in June 2020, according to the trade group’s latest report.
Overall, the share of loans with temporary, pandemic-related payment suspensions fell 26 basis points to 1.41% as the number of borrowers dropped by 130,000 to 705,000 from 835,000
The slowdown in exits occurred because many who experienced hardships early in the pandemic have recovered or sought other alternatives, leaving only those less likely to leave because they face persistent challenges, or new ones from the spread of
“It is likely that the remaining borrowers in forbearance have experienced either a permanent hardship that may require more complex loan workout solutions, or they have encountered a recent hardship for which they are now seeking relief,” said Marina Walsh, MBA’s vice president of industry analysis, in a press release.
The slowdown in net exits during December was most notable in privately-held loans. The share in forbearance dropped by 51 basis points on a consecutive-month basis to 3.4% from 3.94%. In comparison, the share fell by 106 basis points the previous month.
The share of loans purchased by government-sponsored enterprises Fannie Mae and Freddie also fell more slowly in December, declining by 8 basis points to 0.68%. The previous month, the share had fallen by 16 basis points.
Only government-insured loans in Ginnie Mae securitizations experienced a more pronounced drop in forbearance share than a month earlier, falling by 47 basis points to 1.63% from 2.1%. A month earlier, the share in this category had declined by 42 basis points.
The distribution of cumulative forbearance outcomes since June 2020 was as follows at the end of December: 29.1% tacked missed amounts on to their end of their loans through a deferral/partial claim, 19.5% stayed on track while payments were technically suspended, 16.9% exited without a loss mitigation plan in place, 14.6% applied for a more affordable modification of financing terms, 11.7% repaid past-due amounts and reinstated, and 6.9% paid off debt through either a refinance or home sale. The remaining 1.3% chose other options like entering a repayment plan, engaging in a short sale in which the home is sold for less than the amount due, or handing over a deed in-lieu of going through the foreclosure process.
The majority of people with completed workouts seem to be getting back on track with their payments, but the share of them that do is slipping a little due to the fact that the remaining borrowers are increasingly likely to have more entrenched or recent challenges.
In December, the share of borrowers with completed workouts who were current was 83.50%, compared to 83.69% the previous month.
