Forbearance share drops below 5% for the first time in a year

Forbearance requests are at an all-time low, and pace of exits is increasing

Forbearance share drops below 5% for the first time in a year

The total share of loans in forbearance fell for the fourth consecutive week, dropping below 5% for the first time in a year, according to data from the Mortgage Bankers Association.

MBA’s latest estimate revealed that forbearance rates inched down from 5.05% of servicers’ portfolio volume to 4.96% as of March 21. That represents 2.5 million homeowners who are currently in some kind of forbearance plan.

“New forbearance requests remained at their lowest level since last March, and the pace of exits increased,” said Mike Fratantoni, MBA’s senior vice president and chief economist. “More than 17% of borrowers in forbearance extensions have now exceeded the 12-month mark.”

By investor type, the share of Fannie Mae and Freddie Mac loans in forbearance dipped six basis points to 2.77%. Ginnie Mae loans in forbearance were down 20 basis points to 6.83%, while the share of portfolio loans and private-label securities (PLS) decreased by one basis point to 8.90%. Independent mortgage bank (IMB) servicers posted a 14-basis point drop in their percentage of loans in forbearance, down to 5.23%, and depository servicers saw their share declined five basis points to 5.10%.

Read more: Biden announces decision on foreclosure ban and forbearance deadline

“Many homeowners need this support, even as there are increasing signs that the pace of economic activity is picking up as the vaccine rollout continues,” Frantatoni said. “Those who have an ongoing hardship due to the pandemic and want to extend their forbearance beyond the 12-month point need to contact their servicer. Servicers cannot automatically extend forbearance terms without the borrower’s consent.”

Other key findings of MBA’s survey:

• By stage, 13.8% of total loans in forbearance are in the initial forbearance plan stage, while 83.4% are in a forbearance extension. The remaining 2.8% are forbearance re-entries.

• Total weekly forbearance requests as a percent of servicing portfolio volume remained flat relative to the prior week at 0.05%, the lowest level since the week ending March 15, 2020.

• Of the cumulative forbearance exits for the period from June 1, 2020, through March 21, 2021:

    • 26.9% represented borrowers who continued to make their monthly payments during their forbearance period.
    • 26.5% resulted in a loan deferral/partial claim.
    • 14.8% resulted in reinstatements, in which past-due amounts are paid back when exiting forbearance.
    • 14.1% represented borrowers who did not make all of their monthly payments and exited forbearance without a loss mitigation plan in place yet.
    • 8.3% resulted in a loan modification or trial loan modification.
    • 7.6% resulted in loans paid off through either a refinance or by selling the home.
    • The remaining 1.8% resulted in repayment plans, short sales, deed-in-lieus or other reasons.