The total number of loans now in forbearance decreased by 12 basis points, from 1.3% of servicers’ portfolio volume in the prior month to 1.18%, according to the Mortgage Bankers Association’s (MBA) monthly Loan Monitoring Survey, released last week.
MBA estimates 590,000 homeowners are in forbearance plans. The decrease of forbearance shows the inverse effect of improving rates for both total borrowers and borrowers in workouts, which rose for the first time since June 2021, according to Marina Walsh, CMB, MBA’s vice president of industry analysis. This month’s strong performance is particularly notable, Walsh says, “given that there is typically a dip in mortgage performance in February because of the shortened number of days to make a payment.”
Key findings:
- Total loans in forbearance decreased by 12 basis points in February 2022 relative to January 2022: from 1.30% to 1.18%.
- By investor type, the share of Ginnie Mae loans in forbearance decreased relative to the prior month: from 1.60% to 1.50%.
- The share of Fannie Mae and Freddie Mac loans in forbearance decreased relative to the prior month: from 0.64% to 0.56%.
- The share of other loans (e.g., portfolio and PLS loans) in forbearance decreased relative to the prior month: from 3.02% to 2.72%.
- Loans in forbearance as a share of servicing portfolio volume (#) as of February 28, 2022:
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- Total: 1.18% (previous month: 1.30%)
- Independent Mortgage Banks (IMBs): 1.44% (previous month: 1.59%)
- Depositories: 0.97% (previous month: 1.06%)
- By stage, 30.1% of total loans in forbearance are in the initial forbearance plan stage, while 57.0% are in a forbearance extension. The remaining 12.9% are forbearance re-entries, including re-entries with extensions.
- Of the cumulative forbearance exits for the period from June 1, 2020, through February 28, 2022, at the time of forbearance exit:
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- 29.2% resulted in a loan deferral/partial claim.
- 19.1% represented borrowers who continued to make their monthly payments during their forbearance period.
- 17.0% represented borrowers who did not make all of their monthly payments and exited forbearance without a loss mitigation plan in place yet.
- 15.2% resulted in a loan modification or trial loan modification.
- 11.5% resulted in reinstatements, in which past-due amounts are paid back when exiting forbearance.
- 6.8% resulted in loans paid off through either a refinance or by selling the home.
- The remaining 1.2% resulted in repayment plans, short sales, deed-in-lieus or other reasons.
- Total loans serviced that were current (not delinquent or in foreclosure) as a percent of servicing portfolio volume (#) rose to 94.94% in February 2022 from 94.91% in January 2022 (on a non-seasonally adjusted basis).
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- 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, Indiana and Oklahoma.
- Total completed loan workouts from 2020 and onward (repayment plans, loan deferrals/partial claims, loan modifications) that were current as a percent of total completed workouts rose to 82.78% last month from 82.26% in January.
The takeaway:
Walsh claims multiple factors contributed to this positive trend including “the availability of variable loss mitigation options, low unemployment that is now below 4.0%, strong wage growth, and rising home equity.”
“There were many positive results in overall mortgage performance in February. The percentage of borrowers in forbearance declined for the 21st consecutive month, and the percentage of borrowers current on their mortgage payments increased to almost 95%—350 basis points higher than one year ago. Finally, the percentage of borrowers with existing loan workouts who were current on their mortgage payments improved for the first time since June 2021,” added Walsh.
