Servicers’ forbearance portfolio volume fell yet again, this time dipping a single basis point to 3.47% from 3.48% last week, according to a survey from the Mortgage Bankers Association.
According to MBA’s estimate, 1.74 million homeowners are still in forbearance plans.
The share of Fannie Mae and Freddie Mac loans in forbearance also decreased two basis points to 1.79%, and Ginnie Mae loans decreased five basis points to 4.30%. The share for portfolio loans and private-label securities (PLS) increased six basis points to 7.44%.
The percentage of loans in forbearance for independent mortgage bank (IMB) servicers decreased one basis point to 3.67%, and the percentage of loans in forbearance for depository servicers decreased two basis points to 3.59%.
Fannie and Freddie loans in forbearance have now stayed below 2% for several consecutive weeks, noted Mike Fratantoni, MBA’s senior vice president and chief economist.
How can servicers best support homeowners as they reach maximum forbearance?
HW Media CEO Clayton Collins recently spoke with Xome CEO Mike Rawls about the challenges servicers are navigating and how they can set themselves and their homeowners up for success as people reach the end of their maximum forbearance.
Presented by: Xome
“Recent economic data continue to show improvement, but it’s clear many homeowners in forbearance still need the relief that is being provided,” Fratantoni said. “Forbearance exits remained low, and there was another increase in new forbearance requests, particularly for Ginnie Mae and portfolio and PLS loans. The net result was another slight decline in the share of loans in forbearance.”
The Department of Housing and Urban Development (HUD), Department of Agriculture (USDA), and Department of Veterans Affairs (VA) announced on July 23 that they will give homeowners options to reduce their monthly principal and interest by lengthening the term of the mortgage, bringing the agencies “closer in alignment with options for homeowners with mortgages backed by Fannie Mae and Freddie Mac,” a White House press release said.
For borrowers who can resume paying their mortgage, federal agencies will allow them to move their payments to the end of their mortgage. But the White House said some homeowners will need “deeper assistance” to become current and keep their homes.
“In order to ensure a stable and equitable recovery from the disruptions of the COVID-19 pandemic and prepare for homeowners to exit mortgage forbearance, the Biden-Harris administration is taking action to keep Americans in their homes and support a return to a more stable housing market,” the White House said in a statement.
The enrollment period for forbearance will conclude at the end of September.
By stage, 10% of total loans in forbearance are in the initial plan stage, while 82.8% are in an extension. The remaining 7.2% are re-entries.
Of the cumulative exits for the period from June 1, 2020, through July 25, 2021, 28.1% resulted in loan deferrals or partial claims. Another 23.1% represented borrowers who continued to make their monthly payments during their forbearance period.
According to the MBA, 15.6% represented borrowers who did not make all of their monthly payments and exited forbearance without a loss mitigation plan in place. Nearly 11% resulted in a loan modification or trial loan modification.
For borrowers still unable to make monthly payments, HUD will give servicers the ability to lengthen the mortgage term. Borrowers could see their mortgage terms extended to 360 months at market rate, to reduce their payments by 25%. In addition to a term extension, borrowers could receive an interest-free subordinate mortgage not due until after the first mortgage is paid off, otherwise known as a partial claim.
HUD will offer a partial claim to borrowers who can start making their mortgage payments again.
The USDA will also offer new options to help borrowers receive a 20% reduction on their payments. The tools include an interest rate reduction, term extension and a mortgage recovery advance, to help cover past due mortgage payments and related costs. The options can be used separately or combined.
There are also options for VA borrowers to reduce their monthly payments after. The VA can purchase up to 30% of borrowers’ unpaid principal balance and arrearages, and provide an interest-free subordinate loan similar to a partial claim. Servicers can also extend the loan term to up to 40 years.
