Mortgage Forbearance Re-entries Climb Past 5%

Welcome to Sagent’s weekly homeowner hardship briefing where we analyze the latest MBA forbearance and other data to offer key takeaways for servicers.

Here’s what you need to know this week about the most recent MBA forbearance data (through May 16):

1. Small Drop in Forbearance Volume Continues 12-Week Downward Trend

This week, the MBA reports another small drop in total forbearance volume (Figure 1). This is the ebb and flow we have become accustomed to seeing. 

 

 

This week’s decline, however small, marks 12 consecutive weeks of downward progression, per the MBA.

2. Forbearance Re-entries Climb Above 5%

The MBA data has been showing a small increase in forbearance re-entries week-over-week, a trend that continues as forbearance re-entries rise above 5% (Figure 2).

 

 

Some worrying trends about re-entries (now above 5%) and extensions past 12 months (now at 52%), implying strain for certain segments of borrowers.

3. Forbearance Exit Patterns Remain Strong

Exit trends continue to follow the same patterns, per MBA. Exits via payment deferrals and loan modifications account for about 50% of the population exiting forbearance (Figure 3), a number that will likely continue to grow.

 

 

Exiting without a loss mitigation plan and exiting without stopping payments remain among the stranger borrower behaviors continue to be a considerable portion of the population (about 25% combined this last week).

The Bottom Line

Of the 2.1 million homeowners still in forbearance, 82.9% have extended their forbearances, and 52% have extended over a year. With some rough math we’ve done using the MBA data, that breaks down as follows:

• 11.8% of the 2.1M borrowers in forbearance are in their initial forbearance plan. This breaks down to roughly 247,800 homeowners in their initial forbearance phase.
• 82.8% of borrowers in forbearance are in a forbearance extension, which breaks down to roughly 1,740,900 borrowers.
• Of the 1,740,900 borrowers already in forbearance extensions, 52% have been in forbearance for more than a year. That works out to roughly 905,268 borrowers that have been in forbearance for more than 12 months.
• The remaining 5.3% of forbearances were re-entries, which accounts for roughly 111,300 homeowners who re-entered forbearance after previously exiting.

Both the uptick in the number of forbearance re-entries and the large (and growing) percentage of borrowers with forbearances aging beyond a year should give servicers pause. April’s lackluster jobs report, coupled with these numbers, suggest that we may continue to see a slower recovery than anticipated until we can see more sustained job growth.