Forbearances fell for another week, but that does not mean homeowners have completely recovered from their economic losses due to the COVID-19 pandemic.
The total number of forborne loans is down to 2.06% of servicers’ portfolio volume, according to the Mortgage Bankers Association’s (MBA) latest survey. The estimated number of homeowners in forbearance plans dropped to around 1 million.
“More borrowers who exited forbearance the last week of October went into modifications, a sign that they have not yet regained their pre-pandemic level of income,” said Mike Fratantoni, MBA’s Senior Vice President and Chief Economist.
The national median household income has fallen 2.9% from 2019 to 2020, and is now $67,521. It is the first decline since 2011, and early forecasts show only small rebounds in 2021.
Some homeowners have chosen to sell their homes rather than enter modifications at the end of their forbearance, leading to an uptick in the supply of affordable homes.
“The end of forbearance has forced many lower-income Americans to put their homes up for sale and become renters,” said Redfin Chief Economist Daryl Fairweather.
“This has caused the number of affordable homes on the market to surge, helping replenish inventory amid an acute housing shortage. It’s a rainstorm after a long drought, but the drought isn’t over yet.”
Despite this news, Frantantoni stressed that October’s strong job market report and rising unemployment bode well for struggling homeowners navigating their forbearance exits.
For Fannie Mae and Freddie Mac loans, forbearances were down five basis points to 0.92%. Ginnie Mae loans fell thirteen basis points to 2.52%. Portfolio loans and private-label securities shares fell thirteen basis points, from 5.13% to 5.00%.
Independent mortgage bank servicers saw a drop of fifteen basis points to 2.28%, and the share for depository servicers declined five points to 2.02%.
Here are some more findings from the report:
- By stage, 15.8% of total loans in forbearance are in the initial forbearance plan stage, while 73.9% are in a forbearance extension. The remaining 10.3% are forbearance re-entries, including re-entries with extensions.
- Total weekly forbearance requests as a percent of servicing portfolio volume (#) remained the same relative to the prior week at 0.04%.
- Of the cumulative forbearance exits for the period from June 1, 2020, through October 31, 2021, at the time of forbearance exit:
- 29.1% resulted in a loan deferral/partial claim.
- 20.4% represented borrowers who continued to make their monthly payments during their forbearance period.
- 16.7% represented borrowers who did not make all of their monthly payments and exited forbearance without a loss mitigation plan in place yet.
- 13.4% resulted in a loan modification or trial loan modification.
- 12.0% resulted in reinstatements, in which past-due amounts are paid back when exiting forbearance.
- 7.0% resulted in loans paid off through either a refinance or by selling the home.
- The remaining 1.4% resulted in repayment plans, short sales, deed-in-lieus or other reasons