Mortgage Forbearances Falling, But Borrowers Exiting without Loss Mit Plan Remain a Concern

Welcome to Sagent’s monthly 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 month:

1. 1.30% of Total Mortgages Remain in Forbearance

Per the latest MBA data (as of February 22nd, 2022), total number of loans now in forbearance decreased by 11 basis points from 1.41% the month prior to 1.30%

Total Mortgages in Forbearance (Source: Mortgage Bankers Association)

This leaves approximately 650,000 borrowers still in forbearance; a positive drop at an anticipated, steady pace.

2. Amount of Borrowers Exiting Without a Plan Remains High

Of the cumulative forbearance exits (from June 1, 2020 to January 31, 2022), at the time of forbearance exit: 29.12% resulted in a loan deferral/partial claim, 19.28% represented borrowers who continued to make their monthly payments during their forbearance period, and 17.04% represented borrowers who did not make all of their monthly payments and exited forbearance without a loss mitigation plan in place.

While the increase in the number of borrowers exiting with no plan in place was minor, it’s important to acknowledge this trend as it indicates there’s much work left to do towards complete pandemic recovery. The persistent wave of borrowers exiting forbearance without a loss mit plan in place suggests that there is still a distinct communication gap between servicers and homeowners

3. Amount of Re-entries Shows Pandemic Recovery is Not Finished

The latest MBA data shows that 26.84% of total loans in forbearance are in the initial forbearance plan stage, while 59.47% are in a forbearance extension. The remaining 13.69% are forbearance re-entries, including re-entries with extensions.

Forbearance Extensions and Re-entries (Source: Mortgage Bankers Association)

While re-entry numbers have plateaued, a lack of decrease clearly signifies that we’re not out of the woods yet when it comes to COVID recovery.

The Bottom Line

These trends display continued (albeit slight) progress at a steady rate as expected, however, it’s vital that we don’t ignore the stubbornly consistent number of borrowers exiting without a loss mitigation plan, as well as those re-entering forbearance. I’m skeptical that the recent, multiple COVID variants could be the cause of the lacking progress.

Marina Walsh, MBA’s Vice President of Industry Analysis, confirmed my concerns, explaining:

There was some deterioration in the performance of borrowers with existing loan workouts. Borrowers in loan workouts may have experienced new life events unrelated to the pandemic, or alternatively, the omicron variant may have triggered or re-triggered employment, health, or other stresses.

I’d like to commend and praise servicers for their consistent efforts through these ever-challenging times, specifically by ensuring their awareness of what we can do to help. Sagent’s loss mitigation and consumer platforms are here to back you and your team through the final stages of this lengthy battle. I’m on standby to answer your policy questions and talk about how to help you care for borrowers as we continue the grind together.

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Servicers still have a lot of work to do before we return to "normalcy". How can Sagent best assist your team expedite this process?

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