The U.S forbearance rate is falling, though not as quickly as it once was.
Data released on Monday by the Mortgage Bankers Association showed that the share of servicers’ portfolio volume in forbearance fell 3 basis points to 5.35% last week.
For the third month in a row, the MBA estimated 2.7 million homeowners are in some form of forbearance, and for almost four months now, forbearance portfolio volume has hovered between 5% and 6% — the longest a percentage range has held since the survey’s origins in May.
However, in the current environment, any sign of forbearance waning is a welcome one. Last week every investor class managed to see declines, with Fannie Mae and Freddie Mac once again claiming the lowest forbearance rate at 3.07%.
Ginnie Mae loans in forbearance, which include loans backed by the Federal Housing Administration, also fell 5 basis points to 7.46%. And even though servicers continued to buy out delinquent loans from the Ginnie Mae pool (subsequently reclassifying them as portfolio loans) the forbearance share for portfolio and private-label securities also managed to fall to 9.14%.
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The MBA data shows that homeowners who remain in forbearance are more likely to be in distress, with fewer continuing to make any payments. According to Mike Fratantoni, the MBA’s chief economist, almost 14%of homeowners in forbearance were reported as current on their payments at the end of last month, but that share has declined nearly every month from 28% in May.
“While new forbearance requests increased slightly at the end of January, the rate of exits picked up somewhat, but remained much lower than in recent months. We are anticipating a sharp increase in exits in March and April as borrowers hit the 12-month expiration of their forbearance plans,” Fratantoni said.
Starting Nov. 2, the MBA began reporting the number of borrowers who continued to make their monthly payments during their forbearance period and have since exited. Since that date, the MBA has revealed that the number of up-to-date borrowers has consistently dropped.
To Fratantoni, servicers and policy makers need to be looking at the long-term unemployed, especially those who have been actively looking for work for 27 weeks or more as reported in January’s job data.
“These are the homeowners who are likely to still be in forbearance and
need additional support until the job market recovers to a greater extent,” Fratantoni said.
But economists are still showing signs of confidence in the market. HousingWire’s lead analyst, Logan Mohtashami, noted with an improving employment situation comes an economic improvement well past forbearance’s peak. Couple that with strong credit profiles from homeowners and nested equity and Mohtashami can outperform on rising home prices.
“This isn’t 2008 all over again. That recovery was slow, but today our demographics are better, and our household balance sheets are healthier. The fiscal and monetary assistance now is hugely improved from what we saw after 2008. We have everything we need to get America back to February 2020 jobs levels; we just need time,” Mohtashami said.
