The forbearance rate is officially below 4% for the first time in a year. Servicers’ forbearance portfolio volume fell 11 basis points last week to 3.93%, according to a survey from the Mortgage Bankers Association. The MBA now estimates 2 million homeowners are still in some form of a forbearance plan.
In addition to last week’s drop, every investor category experienced some form of decline. Fannie Mae and Freddie Mac loans once again made up the smallest share at 2.05% ― a 4 basis point improvement ― while Ginnie Mae loans in forbearance fell 7 basis points to 5.15%.
Portfolio loans and private-label securities (PLS) decreased 35 basis points to 7.98% and the percentage of loans in forbearance for independent mortgage bank servicers decreased 16 basis points to 4.05%. The percentage of loans in forbearance for depository servicers also dropped 3 basis points to 4.16%.
“New forbearance requests, at 4 basis points, remained at an extremely low level. More than 44% of borrowers who exited this week used a deferral plan, highlighting the importance of this option,” said Mike Fratantoni, MBA’s senior vice president and chief economist.
The next estimated wave of forbearance exits is expected to take place in two weeks, per the end of many borrowers’ extensions plans. Approximately 830,000 plans are currently slated for review for extension or removal in June, the final quarterly review before early forbearance entrants begin to reach their 18-month plan expirations later this year, data analytics giant Black Knight said.
Of the cumulative forbearance exits for the period from June 1 through June 13, 27.6% resulted in a loan deferral/partial claim. Another 24.1% represented borrowers who continued to make their monthly payments during their forbearance period.
“As more homeowners reach the end of their term, we should continue to see the share in forbearance decline,” Fratantoni said. “The improving job market and strong housing market are providing support for those who do exit.”
Government watchdogs like the Consumer Financial Protection Bureau have warned servicers about potential consequences if they do not properly assist borrowers out of forbearance. However, borrowers are in a greater position now more than ever to come out seemingly unscathed from their forbearance plans.
In fact, calculating mark-to-market CLTVs of homeowners in some form of mortgage postponement through February 2021, Black Knight estimated that 96% have at least 10% equity in their homes. For many borrowers, this will be enough to avoid foreclosure. For others, it should be adequate for properly selling through traditional real estate channels to avoid a default or short sale.