Mortgages in Forbearance Set to Drop Below 1 Million

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. 2.06% of Total Mortgages Remain In Forbearance

Per the latest MBA data as of November 8th, the total number of loans now in forbearance decreased by 9 basis points from 2.15% the prior week to 2.06%.

This leaves roughly 1 million homeowners still in forbearance, and we’re on pace to drop below one million soon which will mark a significant milestone in the pandemic recovery.

2. Half of Forbearance Extensions Are Older Than 1 Year

The latest MBA data shows that, as of October 31st, 48.66% of borrowers have been in forbearance for 12 months or less. The remaining 51.34% have been in forbearance for 12+ months.

This shows that many of those homeowners with mature forbearances (12+ months), which we’ve discussed before on the blog, are exiting (or have already exited) forbearance as their accommodation periods come to an end.

3. More Borrowers Using Modifications/Deferrals to Exit

Of the cumulative forbearance exits thus far (from June 1, 2020, through October 31, 2021), 29.1% resulted in a loan deferral or partial claim and 16.7% represented borrowers who did not make all of their monthly payments and exited forbearance without a loss mitigation plan in place yet. More on that here.

The massive jump in borrowers exiting using modifications and payment deferrals week-over-week signifies that most people still haven’t entirely recovered from the financial hardships inflicted by COVID-19.

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

More borrowers who exited forbearance the last week of October went into modifications, a sign that they have not yet regained their pre-pandemic level of income.

The Bottom Line

The continued decrease of the total number of borrowers in forbearance — paired with the simultaneous increase in those exiting via loan modifications and deferrals — is definitely reassuring to see. We’re also primed to drop below 1 million borrowers in forbearance, a significant milestone on our way back to some semblance of normalcy.

While we continue to progress, there’s still much work to be done as we strive towards outright COVID-recovery.

Sagent’s loss mitigation and consumer platforms are here to ensure the remainder of this pandemic recovery is as painless as possible for you and your customers. I’m ready to answer your policy questions and talk about how to help you care for borrowers during the continued grind.

Editor’s Note: Per the MBA’s announcement that they will move from a weekly forbearance report to a monthly report starting immediately, we will also be adjusting our homeowner hardship briefs to be released on a monthly basis. Stay tuned for the next installment in early December.