The total share of loans remaining in forbearance now stands at 2.89%. This share is expected to drop quickly as forbearance exits pick up the pace over the next several weeks.
Total Loans Remaining in Forbearance Down to Just 2.89%
During the week ending September 26, the total share of loans in forbearance declined to just 2.89%, according to the Mortgage Bankers Association (MBA). This 2.89% share is now below the pre-pandemic level of 2.96%.
Portfolio loans and private-label securities dipped by 14 bps to 6.77%. The share of independent mortgage bank loans in forbearance dropped to 3.19% and the GSE forbearance rate (Fannie Mae and Freddie Mac loans) came in at just 1.38%.
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Pace of Borrowers Exiting Forbearance Programs to Increase
The MBA estimates that 1.4M homeowners are now remaining in active forbearance plans. Mike Fratantoni, senior vice president and chief economist with the MBA, believes that homeowner exits from forbearance plans will pick up the pace over the next few weeks as many homeowners are coming to their 18-month expiration dates.
Fratantoni said, “Most borrowers exiting forbearance through a workout are opting for a deferral plan, which allows them to resume their original (monthly mortgage) payment, while moving the forborne amount to the end of the loan.”
Current Rate of Forbearance Exits
According to CoreLogic, 1.2M mortgage borrowers exited forbearance plans by the end of September. The end of September marks the end of the time, 18 months, that the CARES Act forbearance plans provided homeowners negatively impacted by the COVID pandemic with mortgage payment protections.
Record-High Home Equity Will NOT Protect All Forbearance Borrowers from Foreclosure
Record-high home equity due to record-high home prices are projected to “save” some forbearance borrowers from foreclosure BUT record-high home equity will not save all forbearance borrowers from foreclosure.
A new report from Black Knight reminds us all that since 2010, approximately 10% of borrowers with more than 120 days in delinquency were referred to foreclosure regardless of their home equity.
Ben Graboske, Black Knight’s data and analytics president, said, “While we may see some variation in foreclosure activity based on equity levels of borrowers who are unable to return to making payments post-forbearance, those with strong equity won’t necessarily be immune to foreclosure referral.”
What could save forbearance borrowers from foreclosure? CoreLogic’s economist Yanling Mayer said, “…it will take an affordable and sustainable (forbearance) exit plan to keep borrowers in their homes and preserve homeownership.”
Thanks to the Mortgage Bankers Association, CoreLogic and HousingWire.
