Real Estate

Share of mortgages in forbearance continues to dwindle

About 2.1 million homeowners remain in forbearance, and close to half of those borrowers haven’t made a payment in more than a year.

The ranks of homeowners taking a break on their mortgage payments during the pandemic continues to thin, with the share of mortgages in forbearance dropping for the 11th week in a row to 4.22 percent.

But about 2.1 million homeowners remain in forbearance, and close to half of those borrowers haven’t made a payment in more than a year, according according to a weekly survey by the Mortgage Bankers Association.

The MBA’s weekly Forbearance and Call Volume Survey shows lower forbearance rates among homeowners with mortgages backed by Fannie Mae and Freddie Mac (2.24 percent) compared to loans funded by private investors (8.26 percent).

Share of mortgage loans in forbearance

Share of loans in forbearance, week ending May 9, 20201. Source: Mortgage Bankers Association.

Before the pandemic, only about 0.25 percent of mortgages were in forbearance. But the numbers have shown dramatic improvement since the share of loans in forbearance peaked at 8.55 percent in June.

Mike Frantantoni

“The opening of the economy, as the successful vaccination effort continues, should lead to further reductions in the forbearance share,” MBA Chief Economist Mike Fratantoni said. “However, many homeowners continue to struggle. Borrowers who are reaching the end of their forbearance term should reach out to their servicer to review their options.”

Most of those still in forbearance (83 percent) have already requested an extension, and more than half if that group have been in forbearance for more than 12 months, Fratantoni said.

Borrowers with mortgages backed by Fannie Mae, Freddie Mac, FHA, VA and USDA can be in COVID forbearance for up to 18 months, with many borrowers scheduled to hit their 18-month program eligibility limit at the end of September.

Depending on the type of loan they have, they may be able to enter into a repayment plan, apply for a loan modification, or defer repayment until they refinance or sell their home. Homeowners and renters can learn more about their options on the Consumer Financial Protection Bureau’s website.

According to a recent analysis by Black Knight, most borrowers who have already left forbearance have either resumed payment on their loans, or paid them off. That, along with a proposed moratorium on foreclosures through Dec. 31, 2021, helps lower the risk of a wave of foreclosures on the scale seen during the downturn that followed the 2007-09 recession.

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