The U.S. forbearance rate measuring the share of mortgages with suspended payments fell seven basis points to 5.83% last week, according to the Mortgage Bankers Association.
“With more borrowers exiting forbearance in the prior week, the share of loans in forbearance declined across all loan types. Almost half of forbearance exits to date have been from borrowers who remained current while in forbearance, or who were reinstated by paying back past-due amounts,” said Mike Fratantoni, MBA’s senior vice president and chief economist.
The share of Fannie Mae and Freddie Mac loans in forbearance fell 6 basis points last week to 3.66% – marking the 21st week in a row the GSEs’ forbearance rate has dropped.
Though the rate for Ginnie Mae loans, which include loans backed by the Federal Housing Administration, rose slightly the week prior, last week’s rate leveled off after falling 4 basis points to 8.13%.
Last week’s drop was largely driven by the forbearance share of portfolio loans and private label securities (PLS) and independent mortgage bank (IMB) servicers both falling 8 basis points to 8.82% and 6.27%, respectively.
How servicers can prepare for potential default wave
Sutherland Mortgage Services President Krish Swaminathan discusses the next wave of servicing, how servicers can best communicate with their customers and the technology available to help with compliance, even in a work-from-home environment.
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While forbearance levels have begun to return to those seen in early April, the MBA said numbers remain remarkably high with an estimated 2.9 million homeowners in forbearance plans. Approximately 23.95% of total loans in forbearance are in the initial stage, while 74.49% are in a forbearance extension. The remaining 1.56% are forbearance re-entries.
The volume of calls from mortgage borrowers to the servicers handling their home loans fell last week to 6.7%, measured as a share of overall servicing portfolio, from 8.9% in the prior week, the MBA report said.
Recent data from Black Knight’s McDash Flash suggests that mortgage payment activity in mid-October was above that of the past five months. The company estimated some 87.3% of all borrowers had made their mortgage payment, up from 86.7% the month prior.
According to Fratantoni, further improvement will require ongoing recovery in the job market and additional fiscal stimulus – a sentiment he said may be more difficult in the coming months following the slowdown in decline in September’s unemployment report.
As for a stimulus package, Democrats and Republicans have come to a standstill on how much money should be injected into the economy, however, a radio appearance on Friday from Senate Majority Leader Mitch McConnell (R-Kentucky) suggested a relief plan may not be enacted until early 2021, CNBC reported.
