Borrowers recently exited forbearance at the fastest pace in a year, as the first wave of homeowners who received CARES Act protections reached the end of allowable relief terms.
The number of forborne borrowers dropped by 11%, or 177,000, for the weekly period ending Oct. 5, according to Black Knight’s McDash Flash forbearance tracking dataset, the largest one-week decline in 12 months. The volume of active forbearances now stands at 1.39 million, down from 1.57 million
“We’ve been waiting for a sizable drop in the number of active forbearance plans, given the large number of plans both marked for either review (for extension/removal) or final expiration in September, and now we’re seeing the first real signs of that,” said Andy Walden, Black Knight’s vice president of market research, in a blog post.
The accelerated rate of reduction reflected trends seen earlier in September, Walden said. “Overall, forbearances have declined by 294,000 (-17%) over the past 30 days, the fastest monthly rate of improvement since October 2020. Plan exits surged then as the first wave of forbearance entrants reached their six-month mark.”
The 1.39 million forborne plans represents a 2.6% share of all active mortgages, down from 3% a week earlier. That number includes 1.4% of the total volume of loans backed by
Homeowners who held government-related mortgages were offered the opportunity to suspend monthly payments through forbearance at the beginning of the coronavirus pandemic in March 2020 upon statement of hardship, and later were granted up to two additional six-month extensions. The Consumer Financial Protection Bureau this week
The largest number of forbearance exits came out of the pool of distressed FHA/VA loans, which saw its numbers drop by 84,000, down 14% from the previous week. The unpaid balance among its loans still in forbearance dropped to $87 billion from $101 billion.
Forborne mortgages held in GSEs and portfolio or private-label securities also declined. Forbearances at GSEs fell 11% week over week, or 50,000, with remaining unpaid balances of distressed plans dropping from $91 billion to $82 billion. Bank portfolios and PLS pools saw 43,000 forborne plans roll off, equaling approximately 8% of their volume. The unpaid balance among its forbearances comes in at $99 billion, down from $107 billion the prior week.
Further reductions should be expected in coming weeks, as servicers work through large volumes of expiring plans, according to Black Knight. More than 180,000 borrowers reaching the end of relief terms in September are still awaiting review.
“Roughly 420,000 additional plans are scheduled to be reviewed for extension/removal through October, setting the stage for further significant declines as we make our way into early November,” Walden said.
The number of homeowners in forbearance totaled 4.76 million at its peak in May 2020. Current volumes are now down 70.8% from that high.
