MBA report shows Ginnie Mae loans in distress as economic hardship mounts
The share of loans in forbearance has increased for the fourth consecutive month, driven primarily by weakening government loan performance.
The total number of loans in forbearance climbed to 0.34% in September, up from 0.31% in August, according to the Mortgage Bankers Association (MBA) Loan Monitoring Survey. This means roughly 170,000 homeowners are currently in forbearance plans, part of the 8.3 million borrowers who have benefited from such plans since March 2020.
A significant portion of the increase was driven by Ginnie Mae loans, with the forbearance rate rising by 10 basis points to 0.76% in September. Meanwhile, Fannie Mae and Freddie Mac loans remained stable at 0.13%, and portfolio loans and private-label securities (PLS) saw a modest increase of two basis points to 0.37%.
“Since May 2024, Ginnie Mae loans in forbearance increased by almost 40 basis points, compared to six basis points for portfolio and PLS loans and three basis points for Fannie and Freddie loans,” said Marina Walsh, vice president of industry analysis at MBA.
Walsh noted that overall loan performance among government-backed products is showing signs of strain.
“We are seeing some weakening in loan performance, particularly among government products,” she added. Overall government loan performance reached a new low for the year in September. In addition, the share of government post-forbearance workouts that are current dropped considerably over the past four months.
“These trends indicate that some homeowners are exhibiting signs of distress – whether because of economic hardships, natural disasters, or other reasons.”
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Borrowers cited various reasons for seeking forbearance, with 70.4% pointing to temporary hardships caused by factors such as job loss, divorce, or disability. Natural disasters accounted for 25.9% of forbearance cases, while only 3.7% of borrowers were still in forbearance due to COVID-19-related financial difficulties.
The survey also found that 65.5% of all loans in forbearance were in the initial stages of the plan, while 20.5% were in extensions and 14% were re-entries, including those with extensions.
Loan workout performance, which includes repayment plans, loan deferrals, and loan modifications, also showed signs of weakening. The percentage of completed workouts that remained current dropped to 68.76% in September, down from 73% in August. This represents a significant decline in homeowners’ ability to stay on track with modified loan terms.
Despite these challenges, loan performance varies by region, with some states showing stronger results than others. For example, states like Washington and California have the highest share of current loans, while Louisiana and Mississippi have some of the lowest.
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