The shares of 'best' and 'worst' outcomes in forbearance match, MBA finds

People who entered plans to postpone payments for pandemic hardships were just as likely to be in what might be considered an optimal scenario as a worst-case one when they exited.

The percentage who kept paying while in forbearance was 17.9% between June 1, 2020 and June 30, 2023 and the percentage was the same for those who left plans delinquent with no immediate foreclosure-prevention plan in place, according to the Mortgage Bankers Association.

The consistency of the matching shares in these categories at the three-year mark for the MBA's now-monthly Loan Monitoring Survey data set suggest that they'll be a benchmark for the performance of pandemic forbearance, which has now largely run its course.

The largest percentage or 29.5% of borrowers opted to set payments missed during forbearance aside for later repayment through vehicles like a deferral or partial claim, but that share was a little lower than the previous month, when it was 29.6%.

The share of borrowers with other outcomes like modifications that make loan terms more affordable (alone or in combination with other types of foreclosure prevention), reinstatements or payoffs through refinances or home sales generally matched numbers the previous month.

Less than 1% of borrowers entered repayment plans. An even smaller share below 0.5% sold homes for less than their debt was worth in short sale or turned them over to mortgage institutions without entering foreclosure in a deed-in-lieu transaction.

The share of mortgages in forbearance has also shrunk to less than half of a percent following both the official end of the pandemic and ensuing expiration of plans for some loans. 

More than three-quarters or 78.3% of borrowers in forbearance continued to cite pandemic hardships as the reason for it last month, while another 6.1% indicated they were struggling with the impact of natural disasters. Another 15.6% cited death, divorce, job loss or disability.

The success rate of completed mortgage workouts borrowers have entered into to address these concerns since 2020 was just shy of 75% at the end of June. MBA measured this based on the share of borrowers with completed workouts who were current at the time.

The MBA estimates that its survey represents 66% for the first-lien mortgage servicing market or 32.8 million loans.