What does future use of forbearance look like?

Broad leeway given to mortgage borrowers to suspend payments for COVID-19 hardships is nearing the end of the road given President Biden's plan to end the national emergency declaration on May 11.

Only 0.64% of consumers still had forborne payments in January, down from 0.7% the previous three months, and the share is likely to drop even lower as in many cases the availability of forbearance is pegged to the declaration.

Payment suspensions will likely continue to be utilized for other purposes but it remains to be seen how much experience with forbearance during the pandemic permanently expands its use in servicing.

"Mortgage forbearance in other forms – whether due to natural disasters or life events – will continue, albeit with different requirements and parameters," said Marina Walsh, the association's vice president of industry analysis, in a press release.

Prior to COVID-19's arrival in the United States, forbearance was primarily extended to borrowers with hardships related to natural disasters, but its application to other forms of distress has inched up as pandemic uses have waned.

Since October, the share of borrowers with forbearance due to pandemic hardships has fallen to 88.78% from 91.41%, while forbearance related to weather events has wavered in a range between 6% and 8%, according to the MBA's Loan Monitoring Survey.

Meanwhile, use of forbearance for purposes other than the pandemic or disasters remains rare but has more than doubled over the course of the past four months, starting at 1.86% in October and ending in January at 4.81%.

The Consumer Financial Protection Bureau has encouraged servicers to apply various types of loss mitigation used to address pandemic hardships to other forms of borrower distress.