Why Are 20% of Homeowners Exiting Forbearance Without A Loss Mit Plan?

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:

The CARES Act, Two Years Later

This week marks the two-year anniversary of the passage of the CARES Act, so where are we with forbearances at this point? The latest data from the MBA indicates that (as we have said) things continue to revert back to what looks like pre-pandemic life.

In the past month, forbearances have decreased by 12 basis points to 1.18%, leaving roughly 590,000 homeowners in forbearance at this point.

Amount of Re-entries Shows Pandemic Recovery Is Not Quite Finished

That said, there are a few trends we need to call out that point to continued stress for homeowners:

1. Borrowers are still entering forbearance, even at this point two years later
2. Forbearance re-entries have been on a steadily increasing trajectory
3. A significant percentage (~20 percent) are still exiting without a loss mit plan in place

On the bright side:

1. The total population in forbearance is continuing its downward trend
2. ~50 percent of borrowers are exiting forbearance using either a deferral, partial claim, or some form of modification

The Bottom Line

All things considered, two years after the passage of the CARES Act, we’re doing okay. This week marked the 21st consecutive week of declines in forbearance volume.

And as Marina Walsh, CMB, MBA’s Vice President of Industry Analysis, noted, “The lower forbearance rates and higher performance rates for both total borrowers and borrowers in workouts – are especially favorable given that there is typically a dip in mortgage performance in February because of the shortened number of days to make a payment.”

She continued:

“We can credit several factors to the improved performance, including the availability of viable loss mitigation options, low unemployment that is now below 4.0 percent, strong wage growth, and rising home equity.”  

We’re on the upswing, but there are still homeowners out there who need your 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.