More borrowers are leaving forbearance despite an increase in new requests
The number of homeowners exiting forbearance reached its highest level since June 2022, despite an uptick in new forbearance requests, according to the latest Mortgage Bankers Association (MBA) Loan Monitoring Survey.
The total share of loans in forbearance fell to 0.40% in January 2025, down from 0.47% in December 2024, as more borrowers transitioned out of temporary relief plans.
“While the number of forbearance requests grew in January, the number of forbearance exits outweighed that pick-up, reaching the highest level since June 2022,” said Marina Walsh, vice president of industry analysis at MBA.
According to MBA’s report, approximately 200,000 homeowners remain in forbearance plans, with loans backed by Ginnie Mae seeing the largest decrease in forbearance rates, down to 0.88% from 1.07% in December.
Forbearance rates for Fannie Mae and Freddie Mac loans fell slightly from 0.19% to 0.17%, while the share of portfolio loans and private-label securities (PLS) remained unchanged at 0.40%. Among servicers, independent mortgage banks recorded a decrease in forbearance rates from 0.54% to 0.43%, while depository institutions held steady at 0.38%.
The report found that financial hardship remained the primary driver for borrowers seeking forbearance. Of those still in forbearance, 64.1% cited job loss, disability, or other temporary financial difficulties. Another 32.9% remained in forbearance due to the impact of natural disasters, while 3.0% of borrowers were still affected by challenges stemming from COVID-19.
“This outcome was somewhat surprising given the recent events in California, but it speaks to recovery in other parts of the country affected by natural disasters and the movement of aged government loans out of forbearance,” Walsh said.
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As forbearance levels continue to shrink, the number of borrowers in permanent loan workouts has grown. The percentage of loans in some form of completed workout – such as repayment plans, deferrals, or modifications – rose to 6.53% in January, up from 6.41% in December and 6.04% a year earlier.
Mortgage performance improved overall, with 95.35% of loans current and not in delinquency or foreclosure, up from 95.05% in December.
However, the trend varied by region. States with the highest share of current loans included Idaho, Washington, Oregon, Alaska, and Colorado. Meanwhile, Louisiana, Mississippi, Indiana, West Virginia, and Alabama had the lowest share of current loans in servicers’ portfolios.
Despite the improvements, uncertainty remains over how external economic factors, such as housing affordability and potential natural disaster recovery efforts, could impact the trajectory of forbearance and loan modifications in 2025.
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