Marketpulse Data: Share Of Mortgages In Forbearance Decreases

The Mortgage Bankers Association’s (MBA) monthly Loan Monitoring Survey revealed that the total number of loans now in forbearance decreased by 5 basis points from 0.44% of servicers’ portfolio volume in the prior month to 0.39% as of July 31, 2023. According to MBA’s estimate, 195,000 homeowners are in forbearance plans. Mortgage servicers have provided forbearance to approximately 7.9 million borrowers since March 2020.

In July 2023, the share of Fannie Mae and Freddie Mac loans in forbearance decreased 1 basis point to 0.20%. Ginnie Mae loans in forbearance decreased 13 basis points to 0.80%, and the forbearance share for portfolio loans and private-label securities (PLS) decreased 7 basis points to 0.45%.

“The prevalence of forbearance plans has dramatically dropped since 2020, and the reasons that borrowers are in forbearance are changing,” said Marina Walsh, CMB, MBA’s Vice President of Industry Analysis. “About two-thirds of borrowers are still in forbearance because of the effects of COVID-19, but a growing share of borrowers are in forbearance for other reasons that cause temporary hardship such as financial distress or natural disasters. With the COVID-19 national emergency lifted, Fannie Mae and Freddie Mac recently announced the retirement of certain COVID-19 flexibilities relating to forbearance plans and workouts.[1]”

Added Walsh, “Given the recent natural disasters impacting California, Washington, and Hawaii, forbearance is one way for mortgage servicers to mitigate the potential impacts on homeowners.”

Key Findings of MBA’s Loan Monitoring Survey – July 1 to July 31, 2023

• Total loans in forbearance decreased by 5 basis points in July 2023 relative to June 2023: from 0.44% to 0.39%.
• By investor type, the share of Ginnie Mae loans in forbearance decreased relative to the prior month: from 0.93% to 0.80%.
• The share of Fannie Mae and Freddie Mac loans in forbearance decreased relative to the prior month: from 0.21% to 0.20%.
• The share of other loans (e.g., portfolio and PLS loans) in forbearance decreased relative to the prior month: from 0.52% to 0.45%.
• Loans in forbearance as a share of servicing portfolio volume (#) as of July 31, 2023:
• Total: 0.39% (previous month: 0.44%)
• Independent Mortgage Banks (IMBs): 0.48% (previous month: 0.56%)
• Depositories: 0.30% (previous month: 0.32%)
• By reason, 69.3% of borrowers are in forbearance because of COVID-19. Another 6.5% are in forbearance because of a natural disaster. The remaining 24.2% of borrowers are in forbearance for other reasons such as a temporary hardship caused by job loss, death, divorce, disability, etc.
• By stage, 36.5% of total loans in forbearance are in the initial forbearance plan stage, while 53.3% are in a forbearance extension. The remaining 10.3% are forbearance re-entries, including re-entries with extensions.
• Of the cumulative forbearance exits for the period from July 1, 2020, through July 31, 2023, at the time of forbearance exit:
• 29.5% resulted in a loan deferral/partial claim.
• 17.8% represented borrowers who continued to make their monthly payments during their forbearance period.
• 18.0% represented borrowers who did not make all of their monthly payments and exited forbearance without a loss mitigation plan in place yet.
• 16.1% resulted in a loan modification or trial loan modification.
• 10.8% resulted in reinstatements, in which past-due amounts are paid back when exiting forbearance.
• 6.5% resulted in loans paid off through either a refinance or by selling the home.
• The remaining 1.2% resulted in repayment plans, short sales, deed-in-lieus or other reasons.
• Total loans serviced that were current (not delinquent or in foreclosure) as a percent of servicing portfolio volume (#) decreased to 96.02% (on a non-seasonally adjusted basis) in July 2023 from 96.12% in June 2023.
• The five states with the highest share of loans that were current as a percent of servicing portfolio: Washington, Colorado, Idaho, Oregon, and California.
• The five states with the lowest share of loans that were current as a percent of servicing portfolio: Louisiana, Mississippi, Indiana, New York, and West Virginia.
• Total completed loan workouts from 2020 and onward (repayment plans, loan deferrals/partial claims, loan modifications) that were current as a percent of total completed workouts decreased to 73.73% in July from 74.70% the previous month.