8.8% of all mortgages now in forbearance – Black Knight

by Ryan Smith19 May 2020

About 4.7 million homeowners are now in forbearance plans – but the pace of new forbearances is continuing to slow, according to a new report from Black Knight.

There were 4.7 million mortgages in forbearance plans as of May 12. That’s up from a revised 4.5 million the week prior. The pace of new forbearance plans, however, is down dramatically. There was an average net increase of just under 26,000 per day over the week – a reduction of more than 85% from the rate in early April.

“Using a momentum-based approach based on the one-week average and assuming an optimistic 10% daily decline moving forward, we would see 4.9 million loans in forbearance by the end of May (9.2% of active mortgages) and just under 5 million (9.4%) by the end of June,” Black Knight said. “A more pessimistic scenario, in which the two-week average rolls forward and the 10% daily decline doesn’t manifest until June 15th, could result in as many as 5.4 million loans (10.1%) in forbearance by the end of the month, and nearly 6.3 million (11.8%) by the end of June.”

The loans currently in forbearance represent 8.8% of all active mortgages and more than $1 trillion in unpaid principal, Black Knight said. Seven percent of all GSE-backed loans and 12.4% of all FHA/VA loans are currently in forbearance.

All this could spell trouble for servicers, according to Black Knight. At the current level, mortgage servicers need to advance a total of $3.6 billion per month to holders of government-backed mortgage securities on COVID-19-related forbearances. That’s in addition to the $1.5 billion in principal and interest payments servicers must make on behalf of borrowers.

Servicers must also contend with another $2.1 billion in lost P&I from portfolio-held or privately securitized mortgages; more than 9% of these loans are in forbearance.

“Reminder: FHFA has said that P&I advance payments will be capped at four months for servicers of GSE-backed mortgages,” Black Knight said. “Given today’s number of loans in forbearance, servicers of GSE-backed loans face $8.8 billion in advances over that four-month period.”