Weekly forbearance exits slow with mountain of expirations looming

The latest rate of declining mortgages in forbearance plans slowed but a major drop-off is on the horizon.

Loans in pandemic-related forbearance fell by 18,000 for the seven days ending Sept. 21, according to Black Knight. This marked a weekly decrease of 1.4% and brought the total outstanding mortgages to 1.578 million, or 3% of all the 53 million active home loans in the market. Nearly a third of those face the end of their protection periods in the near future, said Andy Walden, Black Knight’s vice president of market research.

“More than 460,000 plans are still slated for review for extension or removal over the final week of September, with some 300,000 set to reach their final expirations based on current allowable forbearance term lengths,” Walden said in a blog post. “This could lead to significant movement in volumes entering early October.”

By investment type, mortgage pools backed by the Federal Housing Administration or Veterans Affairs had the largest weekly drop of 11,000, bringing its forborne share to 5.2% and collective unpaid principal balance to $105 billion. Government-sponsored enterprises came next with a 10,000 decline in distressed plans, dragging down its share to 1.7% and an UPB of $95 billion.

However, portfolio and private-label loans in forbearance rose by 3,000, increasing the distressed share to 3.8% and UPB to $104 billion.

Servicers need to pay estimated monthly advances of $1.7 billion in principal and interest payments and $800 million in taxes and insurance per month, according to the analysis. Those are broken down by approximately $500 million and $200 million for government-sponsored enterprise loans, $600 million and $300 million for government-backed loans, and $600 million and $300 million for private labels.