Forbearances Drop 14bps as More Homeowners Seek Exit Strategies

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 Volume Sees Biggest Drop in a Month

After a few weeks of smaller declines in forbearance volume (7bps drop last week, 1bps drop the two weeks before that), this week’s forbearance data from the MBA shows a significantly larger decrease of 14bps this week with forbearance volume at 3.26% (down from 3.40% last week).

That works out to roughly 1.6M borrowers still in forbearance. The drop this week demonstrates the ebb and flow of borrowers exiting and the corresponding challenges facing servicers as we transition from “response” to “recovery”.

2. Uptick in Homeowners Exiting Forbearance This Week

After multiple extensions of the foreclosure moratorium, the final extension expired on July 31 and the CFPB will permit foreclosures under certain circumstances moving forward. This is a likely factor that is driving forborne borrowers into action; the threat of foreclosure now seems much more real, driving borrowers on what needs to be done to keep the home

Overall, borrowers continue to exit using payment deferral / partial claim (28.2%/11% respectively), which shows that these programs are working.  That said, a significant portion of the population (16%) is still exiting without a plan in place.

3. Forbearance Re-entries and New Requests Slowing Down

A few weeks ago, we noted potential problems with new requests and re-entries edging up.  This trend appears to have slowed (for the moment) but is still worth monitoring.

The Bottom Line

As forbearance exit numbers continue to increase, the pressure (and operational challenges) for servicers will increase in kind. Servicers need to leverage their tech to supercharge their borrower outreach and ensure no one slips through the cracks.