Mortgage forbearances drop for first time since coronavirus hit: MBA

After weeks of watching the curve gradually flatten, the coronavirus-related mortgage forbearance growth rate decreased 2 basis points between June 8 and June 14, according to the Mortgage Bankers Association.

About 8.48% of all outstanding loans or approximately 4.2 million mortgages sat in forbearance plans as of the second week of June, compared to 8.55% and nearly 4.3 million the week earlier.

"Fewer homeowners in forbearance underscores the continued improvements in the job market, and provides another sign of the fundamental health of the housing market, which has rebounded considerably over the past several weeks," Mike Fratantoni, the MBA's senior vice president and chief economist, said in a press release.

"The big unknown with respect to this positive development is the extent to which it relies upon policy measures put in place to help families through this crisis, particularly the stimulus payments and enhanced unemployment insurance benefits that were key parts of the CARES Act. We expect to see further improvements in the weeks ahead given the drop in forbearance requests this week."

The share of loans in forbearance at independent mortgage bank servicers edged down to 8.4% from 8.43% over that period. The decline was more drastic at depositories, dipping to 9.15% from 9.24%.

The share of conforming mortgages — those purchased by Fannie Mae and Freddie Mac — in forbearance fell to 6.31% from 6.38%. Private-label securities and portfolio loans — products which were not addressed by the coronavirus relief act — saw a major shift, with their share of forbearance dropping to 9.99% from 10.18% one week prior.

Ginnie Mae mortgages — Federal Housing Administration, Department of Veterans Affairs and U.S. Department of Agriculture Rural Housing Service products — which maintained the highest percentage of loans in forbearance by investor type at 11.83%, stayed static.

Forbearance requests as a percentage of servicing portfolio volume decreased to 0.15% on June 14 from 0.19% on June 7. Call center volume as a percentage of portfolio volume also decreased, going to 7.7% from 8%.

The MBA's sample for this week's survey includes a total of 53 servicers including 28 independent mortgage bankers and 23 depositories. Two subservicers also were part of the sample. By unit count, the respondents represented nearly 76%, or 38.2 million, of outstanding first-lien mortgages.

Black Knight's latest estimate extrapolated 4.6 million borrowers — or 8.7% of mortgages — in active forbearance plans through June 16. The estimate breaks out FHA and VA loans individually, with approximate shares of 14% for FHA and 7% for VA.

"Fortunately, the numbers are manageable. The recession did not turn into a depression, which a lot of people were afraid of," Rob Zimmer, principal at TVDC and registered lobbyist for both the Community Mortgage Lenders of America and Veterans United, said in an interview. "FHA [loan forbearance level] is a little elevated but that's not surprising since their mission is to serve people who have more difficulty reaching homeownership. But I've always liked the VA program. It has the lowest default rate every quarter going back to 2007. On top of that, we're finding out it has very reasonable forbearance rates."