MBA: Pace Of Forbearance Exits Drops To Lowest Since June 2020

The total number of loans in forbearance fell from 1.67% of servicers’ portfolio volume to 1.41% in December 2021, according to the Mortgage Bankers Association’s (MBA) Loan Monitoring Survey. The pace of monthly forbearance exits is at its lowest point since MBA began tracking exits in June 2020.

MBA estimates 705,000 homeowners are currently in forbearance plans.

Independent mortgage banks saw a 0.28% decline from 1.94% to 1.66%, while depositories saw a 0.28% drop from 1.52% to 1.24%.

The share of forborne Fannie and Freddie loans fell to 0.68%, down by 8 basis points, while Ginnie Mae loans fell from 2.10% to 1.63%, down 47 basis points. PLS and portfolio loans in forbearance dropped by 51 basis points to 3.43%.

“The share of loans in forbearance continued to decline in December 2021. This was especially the case for government and private-label and portfolio loans, as those loans have higher levels of forbearance than loans backed by Fannie Mae and Freddie Mac,” said Marina Walsh, CMB, MBA’s Vice President of Industry Analysis.

“It is likely that the remaining borrowers in forbearance have experienced either a permanent hardship that may require more complex loan workout solutions, or they have encountered a recent hardship for which they are now seeking relief.”

By stage, 23.2% of total loans in forbearance are in the initial forbearance plan stage, 63.1% are in forbearance extension, and the remaining 13.7% are in re-entry, including re-entry with extensions. 

Total current loans serviced rose to 94.85%, up from 94.58% in November.

Total completed loan workouts from 2020 that were current fell to an 83.50% share of total completed workouts from 83.69% in October.

Forbearances have continued improving, but Black Knight noted that new plan starts recently rose again, reaching their highest level since the first week of December when they experienced an unexpected jump. However, the 4-week moving average is down 9% month-over-month.

Most homeowners who have exited forbearance are up to date on their payments and not at risk of foreclosure. Filings are returning slowly, and 2022 should see a moderate climb back to normal levels, according to Rick Sharga, executive vice president at RealtyTrac, an ATTOM company. 

“Government and mortgage industry efforts have prevented millions of unnecessary foreclosures, and while it’s likely that we’ll see a slight increase in the first quarter, we probably won’t see foreclosure activity back to normal levels before the end of 2022,” he said.

Here are some highlights from the MBA report:

  • Of the cumulative forbearance exits for the period from June 1, 2020, through December 31, 2021, at the time of forbearance exit:
    • 29.1% resulted in a loan deferral/partial claim.
    • 19.5% represented borrowers who continued to make their monthly payments during their forbearance period.
    • 16.9% represented borrowers who did not make all of their monthly payments and exited forbearance without a loss mitigation plan in place yet.
    • 14.6% resulted in a loan modification or trial loan modification.
    • 11.7% resulted in reinstatements, in which past-due amounts are paid back when exiting forbearance.
    • 6.9% resulted in loans paid off through either a refinance or by selling the home.
    • The remaining 1.3% resulted in repayment plans, short sales, deed-in-lieus or other reasons.
  • The five states with the highest share of loans that were current as a percent of servicing portfolio: Idaho, Washington, Colorado, Utah, and Oregon.
  • The five states with the lowest share of loans that were current as a percent of servicing portfolio: Louisiana, Mississippi, New York, Illinois, and Indiana.