Recent MBA survey signals stronger loan performance
The Mortgage Bankers Association’s (MBA) latest survey shows a decrease in the number of loans under forbearance, indicating continuing recovery in the mortgage sector.
As of November 30, the total number of loans in forbearance dropped by three basis points, from 0.29% to 0.26% of servicers’ portfolio volumes compared to the previous month. This dip represents a significant shift from the peak of the pandemic, when approximately 8.1 million borrowers had entered into forbearance plans from March 2020. As it stands, about 130,000 homeowners are currently in forbearance.
Broken down by loan type, the survey found that the share of Fannie Mae and Freddie Mac loans in forbearance fell to 0.16%, while Ginnie Mae loans dropped to 0.47%. Portfolio loans and private-label securities (PLS) also decreased, settling at 0.30%.
“Nearly 96% of all home mortgages are performing, which underscores how strong servicing portfolio performance is right now with the same resilience seen in the US labor market,” said Marina Walsh, MBA’s vice president of industry analysis. “Meanwhile, the performance of loan workouts is solid but declined last month. Roughly 70% of loan workouts initiated since 2020 are current.”
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Despite the positive trends, Walsh warned of potential future challenges. “We’re anticipating an economic downturn in 2024, and early distress is already visible in other credit areas like car loans and credit cards. This suggests that those who previously struggled with their mortgage payments might face difficulties again in a weaker economy and with rising unemployment,” she added.
The survey shed light on the reasons behind forbearance. Over half of the borrowers in forbearance (53.6%) cited temporary hardships such as job loss, death, divorce, or disability, while 34.3% were due to COVID-19 impacts and 12.1% to natural disasters. It also revealed that 49.0% of loans in forbearance are in the initial plan stage, 35.1% are in an extension phase, and 15.8% are re-entries, including extensions.
Upon exiting forbearance, different outcomes were observed. For instance, 29.4% of borrowers had their loans deferred or partially claimed, and 17.7% continued making payments during the forbearance period. About 18.4% left forbearance without a loss mitigation plan, and 16.1% underwent a loan modification or trial modification.
The survey also noted a slight decrease in current loans, down to 95.71% in November 2023 from 95.80% in the previous month. It highlighted the states with the highest and lowest percentages of current loans, with Washington, Colorado, Idaho, Oregon, and Montana at the top and Louisiana, Mississippi, Indiana, New York, and Illinois at the bottom.
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