Biggest decline in new mortgage forbearances yet logged

While the rate of mortgages going into coronavirus-related forbearance decreased the prior two weeks, its largest drop since the onset of the pandemic — at 8 basis points — occurred between June 22 and June 28, according to the Mortgage Bankers Association.

Approximately 8.39% of all outstanding loans or almost 4.2 million mortgages sat in forbearance plans the final full week of June, compared to 8.47% and about 4.2 million in the MBA’s report the week before.

"We learned last week that the job market improved more than expected in June. With that as background, it is not surprising that the forbearance numbers continue to improve as more people go back to their jobs," Mike Fratantoni, the MBA's senior vice president and chief economist, said in a press release.

"The improvement in the forbearance data was broad-based, with declines for both GSE and Ginnie Mae loans. The decrease in new forbearance requests indicates that further declines are likely in the weeks ahead. Looking at the mix of loans that are exiting forbearance, we are seeing a higher share exiting into deferral options and modifications, and somewhat fewer simply opting out of a forbearance plan."

The share of loans in forbearance at independent mortgage bank servicers dropped to 8.33% from 8.42% over that period. Depositories fell to 9.03% from 9.09%.

The share of conforming mortgages — those purchased by Fannie Mae and Freddie Mac — in forbearance decreased to 6.17% from 6.26%. Private-label securities and portfolio loans — products which were not addressed by the coronavirus relief act — saw their share of forbearance actually rise to 10.08% from 10.07%.

Ginnie Mae mortgages — Federal Housing Administration, Department of Veterans Affairs and U.S. Department of Agriculture Rural Housing Service products — dropped to 11.72% after sitting at 11.83% for three straight weeks.

Forbearance requests as a percentage of servicing portfolio volume edged down to 0.12% on June 28 from 0.15% on June 21. Call center volume as a percentage of portfolio volume decreased to 6.8% from 7.8%.

The MBA's sample for this week's survey includes a total of 51 servicers including 28 independent mortgage bankers and 21 depositories. The sample also included two subservicers. By unit count, the respondents represented nearly 76%, or 38.2 million, of outstanding first-lien mortgages.

Black Knight's latest forbearance release corroborated the MBA's data. The estimate from July 3 showed active forbearance plans fell by roughly 104,000 to the lowest total since early May. The estimate shows mortgage servicers will have to advance $5.6 billion each month in principal and interest payments and an additional $2 billion due in taxes and insurance.