Mortgage Forbearance Rates Fall Below 4%

Welcome to Sagent’s weekly homeowner hardship briefing where we analyze the latest market data, including the Mortgage Bankers Association’s forbearance data, to offer key takeaways for servicers.

Here’s what’s new this week:

1. Forbearance Rates Fall Below 4%

For the first time since the pandemic began — and ahead of the critical foreclosure moratorium deadline on June 30, the total percentage of mortgages in forbearance has fallen below 4% of all mortgage loans.

According to the Mortgage Bankers Association’s latest forbearance data through June 13, forbearances now make up 3.93% of all mortgages, which works out to roughly 2 million homeowners still in forbearance. 

This is an 11-basis-point drop from last week, down from 4.04% of servicers’ portfolio volume. This is also the 16th consecutive week with a decline in overall forbearance volume.

2. Slow and Steady Progress in the Right Direction

If you’ve kept your eye on forbearance data week-over-week, you might notice a few emerging trends. Overall forbearance volume is trending down, even as forbearance re-entries rise (up to 5.9% from 5.8% last week). Meanwhile, forbearance extensions trend upward as forbearances mature.

We’re also seeing a rising number of forbearance exits week-over-week as more borrowers explore their loss mitigation options. This week, 44% of borrowers who exited forbearance did so via a payment deferral plan (more on what that means here), according to MBA chief economist and senior Vice President Mike Fratantoni. 

 

3. Critical Policy Changes Expected ASAP

The existing foreclosure moratorium expires on June 30, and I expect that additional policy guidance will be forthcoming to address that and provide additional clarity with regard to forbearances through 2021. 

We’ve mentioned before that the CFPB has proposed a rule change to Regulation X that would extend the foreclosure moratorium through (at least) December 31, 2021, and I expect that said proposal will likely be finalized soon. 

The Bottom Line

We seem to be in a bit of a holding pattern for now until additional policy guidance is released. Expect these trends to continue week-over-week, and keep an eye out for more policy developments ahead of the June 30 foreclosure moratorium deadline. As always, I’ll be here to walk through the implications for servicers as soon as we get any new policy developments.