The percentage of mortgages currently in forbearance remained almost entirely flat at 3.25%, according to the latest report from the Mortgage Bankers Association (MBA), though the industry expects a “sharp” increase in forbearance exits over the next month as struggling borrowers reach the end of the maximum time they can put off or decrease their payments.
Most federally backed mortgages are eligible for a total of 18 months of forbearance—an initial six-month period and two six-month extensions, if requested. That opportunity was initially offered through the CARES Act, which was signed into law March of 2020.
“The share of loans in forbearance changed little once again this week, as both new requests and exits remained at a slow pace,” said Mike Fratantoni, MBA’s senior vice president and chief economist, in a statement. “For those borrowers who have exited in August, the majority either enter deferral plans or obtain modifications.”
Over 80% of all mortgages in forbearance are in the extension period, according to the MBA survey, with about 10% in the initial plan stage.
Total mortgages in forbearance have fallen steadily over the last year after peaking at over 8% in June of 2020.
What’s Happening?
It is not clear exactly how many borrowers will be forced out of forbearance in the coming weeks. Of the 1.6 million in forbearance, about 63% have exercised more than 12 months of their allotment, according to the survey.
The most common result for those exiting forbearance plans over the last 13 months was loan deferral, according to the survey, with 28% of respondents having agreed to make missed payment at a later time. Nearly a quarter (22.5%) were actually able to make payments during their deferral period.
Other borrowers, however, exited forbearance on less positive terms—16% with unpaid payments and no loss mitigation plan, and 7.5% through refinancing or selling the home.
Since the onset of the pandemic, MBA has also tracked call center activity, measuring how mortgage servicers handle borrower inquiries about their loans. The percentage of overall calls related to forbearance issues fell slightly, the survey said, from 7.5% to 6.3%.
Jesse Williams is RISMedia’s associate online editor. Email him your real estate news ideas to jwilliams@rismedia.com.
