The number of loans in forbearance fell 11% in April from 1.05% of servicers’ portfolio volume to 0.94%, according to the Mortgage Bankers Association’s (MBA) Loan Monitoring Survey.
MBA now estimates that 470,000 homeowners remain in forbearance plans.
Of Fannie and Freddie loans, the number in forbearance dropped 6 basis points to 0.43%. Ginnie Mae loans saw an 11 basis point drop to 1.49%, while PLS and portfolio loans saw a 29 point decline to 2.15%.
“With the number of borrowers in forbearance decreasing to less than half a million, the pace of monthly forbearance exits reached its lowest level since MBA started tracking exits in June 2020,” said Marina Walsh, CMB, MBA’s Vice President of Industry Analysis. “Servicers are expected to continue making small incremental inroads to the remaining loans in forbearance.”
The share of borrowers who are current on their payments rose to the highest levels this year despite current challenges like inflation.
Walsh noted that indicators such as inflation or the stock market don’t always hold water when looking at loan performance.
“The best indicator of loan performance is overall national employment. The U.S. unemployment rate is still below 4 percent, leaving borrowers in a good position to make their monthly mortgage payments,” Walsh said.
Overall, U.S. homeowners are in a good position to come out of forbearance strong. In January, delinquencies dropped to their lowest rate since at least January 1999 thanks to home price appreciation and the strong jobs market.
“The large rise in home prices…has built home equity and is an important factor in the continuing low level of foreclosures,” said Dr. Frank Nothaft, Chief Economist of CoreLogic.
“Nonetheless, there are many homeowners that have faced financial hardships during the pandemic and are emerging from 18 months of forbearance. The U.S. may experience an uptick in distressed sales this year as some owners struggle to remain current after forbearance and loan modification.”