Forbearance rates hit highest monthly increase since pandemic
The number of homeowners in mortgage forbearance rose sharply in October, recording the largest monthly increase since the early days of the pandemic in May 2020.
The Mortgage Bankers Association (MBA) reported that 235,000 borrowers were in forbearance as of October 31, 2024, up by approximately 65,000 from the previous month. The surge, representing a jump from 0.34% to 0.47% of all loans, is linked primarily to the aftermath of Hurricanes Helene and Milton.
“Approximately 65,000 more borrowers are in forbearance compared to one month ago,” said Marina Walsh, vice president of industry analysis at MBA. “While forbearances are still low compared to the height of the pandemic, the monthly increase in forbearances is the largest since May 2020 and likely driven by the effects of Hurricanes Helene and Milton.”
More than half of the forbearances (51.5%) were tied to temporary hardships such as unemployment or personal crises like death, divorce, or disability. Only 3.1% of current forbearances are related to pandemic-era challenges, underscoring a shift in the reasons behind financial difficulties.
“Of those loans in forbearance, 45% are related to natural disasters while the remaining 55% are primarily related to temporary hardship such as job loss, death, divorce, or disability,” Walsh added. “Notwithstanding the storms, some borrowers may be experiencing other economic distress. October marks the fifth consecutive month in which the forbearance rate has increased, and the performance of overall servicing portfolios and loan workouts weakened compared to this time one year ago."
The MBA report revealed that Ginnie Mae loans were hit hardest, with the share of loans in forbearance rising from 0.76% in September to 1.06% in October. Similarly, forbearance rates for Fannie Mae and Freddie Mac loans increased from 0.13% to 0.20%, while private-label securities and portfolio loans climbed from 0.37% to 0.43%.
The percentage of loans considered current within servicing portfolios dipped slightly in October, dropping to 95.44% from 95.59% in September. This marks a decline of 36 basis points compared to one year ago.
Over 71% were in their initial stages, with 15.6% in extensions and 12.8% re-entering forbearance after exiting earlier plans. Meanwhile, completed loan workouts, including repayment plans and loan modifications, showed signs of strain. Only 68.47% of loans modified since 2020 were current, a decline from 68.76% in September and 72.31% a year earlier.
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Geographically, states like Washington, Idaho, and California had the highest share of loans considered current, while Louisiana and Mississippi were among the states with the lowest percentages. These regional disparities highlight the uneven impact of economic challenges and natural disasters across the US.
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