Share of mortgage loans in forbearance declines again

The number of American homeowners in forbearance declined in early May, continuing a spring trend that sees many borrowers who enrolled in forbearance plans due to coronavirus-related hardship exiting at a quicker pace than anticipated.

The share of loans in forbearance in servicer portfolios declined to 4.36% in the week ending May 2, a 11 basis point drop from the 4.47% share recorded a week earlier, according to a Mortgage Bankers Association report published Monday. The share of Ginnie Mae loans in forbearance dropped 20 points to 5.82% while the share of such loans at Fannie Mae and Freddie Mac combined made up a 2.32% share, a drop of 10 points from the week before.

Independent mortgage banks saw a 10 point drop in the share of forbearances, clocking in at 4.58%. Private label securities and portfolio loans saw no change from week to week, keeping a 8.55% share of loans in forbearance. Meanwhile, depositories saw a 15-basis-point drop with only a 4.47% share of loans in forbearance.

“This 10th week of decreases reflected a faster rate of exits and a steady, low level of new requests,” said Mike Fratantoni, MBA’s senior vice president and chief economist. “Homeowners who have exited forbearance and been able to take up their original payment again are performing at almost the same rate as the overall mortgage servicing portfolio.”

The total number of mortgages in forbearance decreased week-over-week by 105,000 with drop-offs occurring across all loan types as of May 4, according to a separate Black Knight report released Friday.

GSE forbearance plans finished with 39,000 fewer borrowers compared to the prior week, down -5.3%, and mortgages backed by the Federal Housing Authority or the Department of Veterans Affairs saw a drop of 44,000 or -4.7%. Portfolio and private-label securitized loans — which, unlike the other categories, have not received protections under the government’s CARES Act — declined by 22,000, or -3.4%.

The year began with close to 2.83 million homeowners in forbearance, accounting for about 5.3% of all active mortgages. Since January, that number has fallen to 2.2 million, or about 4.2% of volume. The amount in unpaid balances among mortgages in forbearance is now down to $4.38 billion, a decrease of almost 23% from the total at the start of the year — $5.68 billion.

Delinquency rates have been falling in tandem in the first quarter. They declined to a seasonally adjusted 6.38% of outstanding loans in the first three months of the year, a 35 basis-point drop from the fourth quarter of 2020, but still up 202 basis points from the same point a year ago, before the full impact of the coronavirus was felt, according to the Mortgage Bankers Association’s National Delinquency Survey, also released Friday.

“Mortgage delinquencies track closely to the U.S. employment rate, and with unemployment dropping from last year’s spike, many households appear to be doing better,” said Marina Walsh, the Mortgage Bankers Association’s vice president of industry analysis.

Still, Walsh urged caution, noting that first-quarter delinquency rates were still higher than its historical quarterly average and that many borrowers were still suffering.

“We continue to see seriously delinquent loans — those loans that are over 90 days past due or in the process of foreclosure — at elevated levels, particularly for FHA and VA borrowers,” she said. “With extended forbearance and foreclosure moratoria still in effect, many of these borrowers are reaching later stages of delinquency. Upon exiting long-term forbearance, some borrowers — regardless of their improving employment prospects — may need more complex workout options, such as loan modifications, to remain in their homes.”