Mortgage forbearance trends: What's changed?

Latest survey reveals a shift from COVID-19 hardships to other challenges

Mortgage forbearance trends: What's changed?

The Mortgage Bankers Association (MBA) released its latest Loan Monitoring Survey for October 2023, revealing a subtle yet significant decrease in the number of loans under forbearance.

As of October 31, the total number of loans in forbearance dipped from 0.31% to 0.29% of servicers’ portfolio volumes. This figure translates to about 145,000 homeowners currently in forbearance plans, a marked decrease from the approximately eight million borrowers who have entered forbearance since the onset of the pandemic in March 2020.

Marina Walsh, vice president of industry analysis at MBA, highlighted a significant shift in the reasons behind forbearance.

“For the first time since MBA began tracking the reasons for forbearance in October 2022, temporary hardships such as job loss, death, and divorce represent a larger share of loans in forbearance by reason than a COVID-19 hardship,” she said, noting the impending changes in policy. “This upward trend will continue as Fannie Mae and Freddie Mac sunset the use of COVID-19 as a reason for delinquency starting in November 2023, and FHA’s COVID-19 forbearance period ends at the end of November 2023.”

Walsh also mentioned that while forbearance is still available for distressed homeowners, the requirements to obtain it may not be as straightforward as during the pandemic.

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For specific loan types, the forbearance rate for Fannie Mae and Freddie Mac loans held steady at 0.18% in October. Ginnie Mae loans saw a decrease in forbearance, falling by five basis points to 0.52%, while the forbearance share for portfolio loans and private-label securities (PLS) dropped by three basis points to 0.32%.

Other key findings from MBA’s October survey include:

  • The overall percentage of loans that were current was down slightly to 95.80% in October.
  • About 45.4% of borrowers in forbearance cited temporary hardships like job loss or death, while 43.3% attributed it to COVID-19 and 11.3% to natural disasters.
  • By stage, 45.1% of total loans in forbearance are in the initial plan stage, 47.0% in an extension, and 7.9% are re-entries, including extensions.
  • In terms of forbearance exits from July 2020 to October 2023, 29.4% resulted in loan deferral/partial claim, and 17.7% represented borrowers who continued making monthly payments during their forbearance period.
  • The percentage of completed loan workouts that were current increased to 72.3% in October from 72.2% the previous month.

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