MBA report sheds light on the current state of loans under forbearance and future challenges
Mortgage forbearance rates dipped in September, but a detailed look at the reasons why borrowers are in forbearance points to potential headwinds.
September saw a two-basis-point decrease in the number of loans under forbearance, dropping to 0.31% from 0.33% in August, according to the Mortgage Bankers Association (MBA)’s Loan Monitoring Survey report. This translates to roughly 155,000 homeowners currently under forbearance plans.
Marina Walsh, vice president of industry analysis at MBA, commented on the findings: “The number of loans in forbearance dropped in September, but the overall performance of servicing portfolios and loan workouts declined slightly.”
She further cautioned about potential economic challenges, noting, “MBA’s baseline forecast has a recession in the first half of 2024. Several factors – including unemployment increases, rising property taxes and insurance, the resumption of student debt payments, and possible natural disasters – may affect loan performance in future months.”
Diving deeper into the data, the report highlighted changes among different loan types:
- Ginnie Mae loans in forbearance significantly dropped from 0.65% to 0.57%.
- Fannie Mae and Freddie Mac loans in forbearance edged down from 0.19% to 0.18%.
- Other loans, including portfolio and PLS loans, decreased from 0.39% to 0.35%.
The reasons for forbearance varied, with a majority (52%) of borrowers citing COVID-19 as the primary cause. Natural disasters accounted for 10.2%, while other reasons, such as job loss or personal hardships, made up the remaining 37.8%.
Read more: US inflation eases slightly in September
The survey also shed light on the performance of loan workouts since 2020. As of September, 72.2% of all completed loan workouts remained current, a slight decrease from 73.4% the previous month.
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