Mortgage forbearance share keeps shrinking

While the number of mortgagors in active forbearance plans continues to shrink, the performance of those that moved to a workout program deteriorated, the latest Mortgage Bankers Association data showed.

Just 0.51% of all mortgages serviced were in forbearance on April 30, down from 55 basis points at the end of March and from 0.94% on the same day last year, the MBA's monthly Loan Monitoring Survey found. Approximately 255,000 are in forbearance.

"About three out of four borrowers are remaining current on their post-forbearance workouts, but this is down from the average of four out of five borrowers that was relatively consistent in 2022 and into 2023," Marina Walsh, vice president of industry analysis, said in a press release. "Overall servicing portfolios remain healthy, and some of the worsening monthly performance can be attributed to seasonal factors such as tax refunds that pushed up the March results and then normalized in April."

However, an expected economic slowdown and increase in unemployment later this year and into 2024, should result in lower loan performance, Walsh said.

This comes in light of the MBA recently released first quarter National Delinquency Survey finding 3.56% of borrowers were late on their scheduled payment on a seasonally adjusted basis, the second lowest level ever.

By investor type, the share of conforming loans in forbearance fell to 24 basis points from 26 basis points in March. Loans securitized through Ginnie Mae had 1.11% forbearance rate, down from 1.18%. Private-label security and portfolio loans in forbearance also reported a 7 basis point decline to 0.61% from 0.68%.

Of the loans currently in forbearance, 34.4% are in the initial plan stage, 53.2% are in an extension, while the remaining 12.4% are re-entries into a plan, including re-entries with extensions.

Monthly forbearance exits decreased in April to 0.1% from 0.12% for March.

As of April 30, 74.4% of all post-forbearance workouts were current, down from 76.7% on March 31. The performance of Federal Housing Administration-loans was down 3 percentage points from the prior month, to 71.7% from 74.7%.

A slightly larger share of Veterans Affairs loans were no longer current, 73.9% from 77%, while other types of government loans fell to 68.5% from 73.2%.

The post-forbearance current rate of Fannie Mae and Freddie Mac loans fell to 81.2% from 83.3%, while for all other forms of conventional loans fell to 70.6% from 71.1%.