Mortgage Forbearances Falling Rapidly, So Why Are Re-entries on the Rise?

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. Massive Drop in Forbearance Exits

Per the latest MBA data, the total number of mortgage loans still in forbearance decreased by a whopping 27 basis points from 2.89% of servicers’ portfolio volume in the prior week to 2.62% as of October 3, 2021.

This means roughly 1.3 million homeowners remain in forbearance two weeks after the 9/30 deadline. The good news here is that this is the fastest exit pace we’ve seen in over a year, indicating that servicers’ tireless efforts to help get their borrowers out of forbearance safely are working, and indicating that these numbers are likely going to continue to decrease.

As Mike Fratantoni, Senior Vice President and Chief Economist at the MBA, explained:

Many borrowers reached the expiration of their forbearance term as we entered October. The pace of exits climbed to the fastest pace in over a year, and the share of loans in forbearance declined at the fastest rate since last October, dropping by 27 basis points.

2. Loss Mitigation Plans/Payment Deferrals Favored by Borrowers Exiting Forbearance

Many borrowers appear to be using loss mitigation and payment deferral plans to their advantage. The latest MBA data shows that of the cumulative forbearance exits for the period from June 1, 2020, through October 3, 2021, at the time of forbearance exit, 28.8% resulted in a loan deferral/partial claim and 21.3% represented borrowers who continued to make their monthly payments during their forbearance period.

While this is another positive trend, during that same timeframe, 16.5% represented borrowers who did not make all of their monthly payments and exited forbearance without a loss mitigation plan in place yet indicating there is still a lot of work to be done.

3. Number of Borrowers Exiting Without Plan Jumps

On a similar note, the total number of borrowers exiting forbearance without a loss mit plan jumped from 4.49% in the prior week to 28.68% this week as seen in the MBA’s latest call volume survey.

That so many borrowers are exiting without a plan alarms me, and demonstrates that many are still not engaging with their servicers.

4. Re-entry Numbers Continue to Climb

Also on the negative side, forbearance re-entry numbers continue to creep back up, with re-entries this week climbing to 9.21%.

This trend worries me as well, and tells me the COVID-19 pandemic recovery is not complete.

The Bottom Line

These past few months have been throttle-down for servicers and it doesn’t look like that will ease up soon, even with the Sept. 30th deadline two weeks behind us. Though I’m glad to see total forbearance numbers slowly trickling away, there’s still much to be done before we can consider our situation “normal” again. While this was the fastest-paced drop in over a year, a large number of borrowers still need our help getting to safety.

Sagent’s loss mitigation and consumer platforms are here to help you boost your consumer outreach success and help forborne borrowers exit as safely as possible. Per usual, I’m on call to answer your policy questions about exactly how you can best help your borrowers continue the fight out of these troublesome times.