Forbearance requests and re-entries increase as exits hits record low

MBA reveals "some deterioration" in the performance of borrowers with existing loan workouts

Forbearance requests and re-entries increase as exits hits record low

More homeowners have requested an extension or to re-enter their forbearance plans in January, the Mortgage Bankers Association reported Tuesday.

Data from the report showed that the total number of loans in forbearance fell by 11 basis points to 1.30% of servicers’ portfolio volume – bringing the estimated number of homeowners still in forbearance to 650,000 as of Jan. 31.

By stage, 26.8% of total mortgages in forbearance are in the initial forbearance plan stage, while 59.5% are in a forbearance extension. The remaining 13.7% are forbearance re-entries, including re-entries with extensions.

“For the second straight month, the pace of forbearance exits reached another low since MBA began tracking exits in June 2020,” said Marina Walsh, vice president of industry analysis at MBA. “There was also a pick-up in new forbearance requests and re-entries for all loans, and particularly for Ginnie Mae loans. Even though the forbearance rate continued its downward trajectory, it was the smallest monthly decline since January 2021.”

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By investor type, the share of Ginnie Mae loans in forbearance decreased by three basis points to 1.60% month over month. The percentage of Fannie Mae and Freddie Mac loans in forbearance was down by four basis points to 0.64%, and forbearance share for portfolio loans and private-label securities (PLS) decreased 41 basis points to 3.02%.

The positive news, Walsh pointed out, is that the percentage of borrowers who were current on their mortgage payments rose slightly from 94.85% in December to 94.91% in January.

“However, there was some deterioration in the performance of borrowers with existing loan workouts. Borrowers in loan workouts may have experienced new life events unrelated to the pandemic, or alternatively, the Omicron variant may have triggered or re-triggered employment, health, or other stresses,” Walsh said.

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 dropped from 83.50% to 82.26% month over month.