Real Estate

Economic Recovery Sends Mortgage Forbearance Level Plummeting

The share of mortgages in forbearance plummeted as the economic recovery continues to remain strong, according to the latest data from the Mortgage Bankers Association. Currently, about 2.3 million homeowners are currently in plans.

The total number of loans now in forbearance decreased by 24 basis points from 4.9 percent of servicers’ portfolio volume in the prior week to 4.66 percent for the week ending Apr. 4, 2021.

“The share of loans in forbearance decreased for the sixth straight week, dropping by 24 basis points – one of the largest decreases in the history of the series,” said Mike Fratantoni, MBA senior vice president and chief economist, in a statement. “The forbearance share also decreased significantly for all three investor categories, with the rate for Ginnie Mae loans down an impressive 45 basis points. Overall, forbearance exits increased to their fastest pace since early November.” 

“Almost 32 percent of borrowers in forbearance extensions have now exceeded the 12-month mark,” Fratantoni added. “In terms of performance, more than 88 percent of homeowners who have exited into deferral plans, modifications or repayment plans were current on their loans at the end of March, compared to 92 percent of all homeowners. The accelerating economic recovery in March helped more homeowners recover and become current on their mortgages, in addition to helping other homeowners with more stable financial situations exit forbearance.”

The share of Fannie Mae and Freddie Mac loans in forbearance decreased to 2.52 percent – a 20-basis-point improvement from last week’s 2.72 percent. Ginnie Mae loans in forbearance decreased 45 basis points from 6.78 percent to 6.33 percent, while the share for portfolio loans and private-label securities decreased by 15 basis points to 8.65 percent. The percentage of these loans for independent mortgage bank servicers decreased 29 basis points to 4.89 percent, and the percentage of loans in forbearance for depository servicers declined 23 basis points to 4.8 percent.

The majority of loans are now in an extension phase. By stage, 13.2 percent of these total loans are in the initial forbearance plan stage, while 82 percent are in an extension. The remaining 4.8 percent are forbearance re-entries.

Over the coming months, there is an expectation that the economic recovery will continue to strengthen. The latest minutes from the Federal Reserve’s March Federal Open Markets Committee (FOMC) meeting showed there is an expectation for a stronger economic recovery in the months and years ahead.

Email Kelsey Ramírez

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