Mortgage forbearance rates continue to drop, but FHA extends forbearance plans
Mortgage performance remained strong, with the overall forbearance rate dropping five basis points in March, according to the Mortgage Bankers Association.
The total number of loans in forbearance fell from 0.60% to 0.55% of servicers’ portfolio volume, MBA’s new survey revealed. The trade association estimated that 275,000 homeowners remained in forbearance plans. Since the onset of the pandemic in 2020, mortgage servicers have provided forbearance to about 7.8 million borrowers nationwide.
“As the COVID-19 national emergency draws to a close, the number of loans in forbearance continues to drop,” said Marina Walsh, MBA’s vice president of industry analysis. “Mortgage performance remains strong with the percentage of borrowers who were current on their mortgage payments and post-forbearance workouts increasing in March.”
Last week, President Joe Biden signed a bill ending the COVID-19 emergency declaration. However, homeowners suffering from pandemic-related financial hardships and needing assistance with their mortgage payments can still enroll in a COVID-19 forbearance plan, according to the Federal Housing Administration (FHA).
“As the national emergency may end earlier than originally expected, FHA is choosing to extend its COVID-19-related forbearance and HECM extension policies beyond the end of the national emergency,” the FHA announced. “This gives borrowers with FHA-insured mortgages who need assistance additional time to request forbearance or a HECM extension. It also provides mortgagees with additional time to offer and process these requests.”
Of the cumulative forbearance exits from June 1, 2020, through March 31, 2023, 18% represented borrowers who continued to make their monthly payments during their forbearance period, and 17.7% represented those who did not make all of their monthly payments and exited forbearance without a loss mitigation plan in place yet.
Meanwhile, 29.6% of the cumulative forbearance exits resulted in a loan deferral/partial claim, 16.1% resulted in a loan modification or trial loan modification, 10.9% resulted in reinstatements, 6.5% resulted in loans paid off through either a refinance or by selling the home, and the remaining 1.2% resulted in repayment plans, short sales, deed-in-lieus or other reasons.
The share of Fannie Mae and Freddie Mac loans in forbearance was down two basis points to 0.26%. The forbearance share for Ginnie Mae loans, portfolio loans and private-label securities decreased 10 basis points to 1.18% and 0.68%, respectively.
“MBA’s forecast still calls for a recession in 2023, which may change the current performance levels, but credit quality is generally good, and many borrowers facing financial hardship can now access enhanced loss mitigation options that resulted from successes of pandemic-related policies,” Walsh said.
Want to make your inbox flourish with mortgage-focused news content? Get exclusive interviews, breaking news, industry events in your inbox, and always be the first to know by subscribing to our FREE daily newsletter.
