Mortgages in forbearance plans fell to nearly 800,000 last month

Loans with suspended payments dropped to 835,000 during November amid a fall wave of exits, down from just above 1 million the previous month, according to the Mortgage Bankers Association.

That caused the percentage of forborne mortgages to fall to 1.67% from 2.06% as many borrowers who left plans proceeded to reinstate loans or begin workouts.

“The share of loans in forbearance declined — albeit at a slower pace than October,” said Marina Walsh, MBA, vice president of industry analysis, in a press release.

The distribution of outcomes after exits during November suggested a slight increase in distress-related workouts as the share of borrowers requesting modifications edged out the payment deferral or partial claim options for the first time since June 2020.

Instances where borrowers asked to modify their loan terms to address long-term changes in their income levels represented 31.45% of total forbearance exits during the month, up from 27.54% in October. Cases where consumers deferred missed payments, tacking them onto the end of their loans, constituted 31.05% of exits in November, down from 33.76% the previous month. An exit into a deferral suggests the income of the borrower involved is strong enough to resume their normal monthly obligation, just not enough to make up for the forborne amount.

The share of private mortgages exiting into a modification during the month rose the most, to 33.41%, up from 28.29% in October. These loans lack some of the more programmatic loss mitigation options those with federal ties have.

The modification share dropped slightly for government-insured or guaranteed mortgages in Ginnie Mae securitizations, even though they often are made to first-time homebuyers with limited financial cushions. The percentage in that category fell to 34.79% from 35.51%.

Loans bought by government-sponsored enterprises Fannie Mae and Freddie Mac, which tend to have relatively stronger credit profiles within the context of the federal mortgage market, saw a slight uptick in modification share to 22.39% from 20.04%.

For mortgages overall in November, a little over 16% of borrowers left forbearance without any loss mitigation plan in place and the loan was not brought current. Improvements in this category occurred across loan types. A drop to 18.50% from 22.61% occurred in the private loan market, and mortgages in Ginnie securitizations experienced a decline to 14.87% from 18.57%. For Fannie and Freddie loans, the number shrunk to 13.75% from 18.05%.

“While there was some deterioration in the performance of borrowers in post-forbearance workouts, four out of five overall remained current,” Walsh said.

The MBA’s numbers reflect 36.5 million loans serviced as of Nov. 30 from a sample of 21 independent mortgage companies, 19 banks and two subservicers, representing 73% of the first-lien home loan market.

This is the association’s first monthly report on forbearance; previously it provided this information on a weekly basis.