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. Total Forbearance Volume Drops 34bps
Per the latest MBA forbearance data through October 10, mortgage loans in forbearance decreased a whopping 34 basis points this week, from 2.62% last week to 2.28% of all mortgage loans.
This means that there are roughly 1.1 million homeowners still in forbearance.
2. Forbearance Exits Accelerating Rapidly
As expected, the pace of forbearance exits is now accelerating as the initial cohort of borrowers who entered forbearance in March/April of 2020 are running up against the end of the allotted 18-month forbearance allowance. We expect this rapid decline to continue in the coming weeks.
3. 24% of Borrowers Exiting Forbearance without a Loss Mit Plan in Place
On this point, it may be the expiration of the loss mitigation safeguards and the start of foreclosure processing in January 2022 that finally brings this population to talk with their servicer.
The CFPB’s loss mitigation safeguards are in place for just over two more months, through the end of 2021.
4. Evidence of a Recovering Economy?
Out of all of the forbearance exits we’ve seen thus far (June 1, 2020- October 10, 2021), far and away the most common method of exit is exiting via payment deferrals/partial claim, with 28.9% of homeowners exiting via this method per the MBA. This is where the borrower returns to the existing monthly payment (for more, see our breakdown of forbearance exit methods here).
The high utilization of payment deferrals / partial claims (where the borrower returns to the existing monthly payment) is a positive sign that borrowers have financially recovered from the pandemic.
The Bottom Line
We’ve been anticipating an acceleration in forbearance exit rates, and this week, we certainly got it. This is a step in the right direction, and hopefully indicates that we’re making headway in our economic recovery.
Mike Fratantoni, MBA Senior Vice President and Chief Economist, validated my cautious optimism this week, explaining:
We are now down to 1.1 million homeowners in forbearance from a peak of 4.3 million homeowners in June 2020. Positive employment and wage prospects, continued home-price appreciation, and the availability of multiple loan workout options are factors that will smooth many homeowners’ transition out of forbearance.
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.