Forbearance exits hit pandemic low, but re-entries are ticking up

Borrowers are exiting forbearance at the slowest pace since the early days of the coronavirus pandemic, the Mortgage Bankers Association said in its latest monthly report.

An estimated 650,000 homeowners are in forbearance plans, a decline of 11 basis points to 1.30% of servicers’ combined portfolio volume in January compared to 1.41% in December, according to the MBA. The decline was the smallest since January 2021, however, and new forbearance requests and re-entries ticked up in the past month.

“Borrowers in loan workouts may have experienced new life events unrelated to the pandemic, or alternatively, the omicron variant may have triggered or re-triggered employment, health, or other stresses,” said Marina Walsh, CMB, MBA’s vice president of industry analysis, in a press release.

The omicron variant’s impact on the mortgage industry appeared to peak in early January as cases rose. But since then, heightened inflation and consumer spending has triggered a significant rise in mortgage rates.

The majority of forbearance exits for all servicers were either through loan modifications (28.2%) or through payment deferrals (28.58%) in January, according to the report. Among borrowers in forbearance, 23.49% exited because their forbearance was canceled or expired without a loss mitigation plan, the highest rate since last August when the rate was 26.35%.

The MBA’s Loan Monitoring Survey, tracking the pace of forbearance exits since June 2020, covers 36.4 million loans, or 73% of the first-mortgage servicing market. The servicers include 18 depositories and 22 independent mortgage companies along with two other uncategorized servicers.

The share of privately-held loans in forbearance saw the largest decline since December, dropping 41 basis points to 3.02%. Fannie Mae and Freddie Mac loans in forbearance decreased 4 basis points to 0.64%, while Ginnie Mae loans in forbearance dipped 3 basis points to 1.60%. In all, the total percentage of loans current, not delinquent or in foreclosure, rose slightly to 94.91% in January compared to 94.85% in December 2021.

Still, new forbearance requests and re-entries rose across government-sponsored entities and private servicer portfolios. The percentage of Ginnie Mae loans entering new requests and re-entries rose 9 basis points to 0.36% in January, the largest rise and greatest overall percentage among servicers. Fannie and Freddie's percentage of new forbearance requests and re-entries rose 1 basis point to 0.08%, while the percentage for privately-held loans rose 3 basis points to 0.28% in January.