The number of homeowners entering forbearance plans on loans backed by Fannie Mae or Freddie Mac surged in October, more than doubling from the previous month, according to new data released Thursday by the Federal Housing Finance Agency (FHFA).

Despite the sharp rise in new forbearance initiations — which climbed to over 17,000 — serious delinquency rates remained steady at a 0.55% rate in October.

The report also highlights a significant pivot in the refinance market: As interest rates softened to 6.25%, the share of cash-out refinances plummeted, signaling that borrowers are increasingly prioritizing rate-and-term benefits over equity extraction.

Forbearance refers to a temporary agreement to pause or reduce loan payments, generally due to financial hardship. The volume of initiated forbearance plans jumped from 7,863 in September to 17,075 in October, according to the FHFA report. Consequently, the total inventory of loans in forbearance rose from 33,360 at the end of September to 42,112 by the close of October. 

This increase brings the total loans in forbearance to approximately 0.14% of the total loans serviced, representing 8% of total delinquent loans.

Despite the uptick in distressed borrowers seeking relief, the 30- to 59-day delinquency rate decreased to 0.93%.

Fannie Mae and Freddie Mac completed 17,032 foreclosure prevention actions in October, pushing the total number of actions since the start of their FHFA conservatorship in 2008 to nearly 7.3 million.

The data shows permanent loan modifications accounted for a significant portion of this activity. The government-sponsored enterprises completed 7,210 permanent modifications during the month.

According to the FHFA, the structure of these modifications heavily favored principal forbearance, which was a feature in 64% of all modifications. Meanwhile, extended-term-only modifications accounted for nearly 36%.

Payment deferrals also saw an increase, with 6,208 borrowers receiving a deferral after completing a forbearance plan, up from 5,616 in September.

The report also notes a shift in borrower behavior regarding refinances. Driven by a dip in mortgage rates, with the average 30-year fixed rate falling to 6.25% in October — a drop of 10 basis points from September — total refinance volume increased.

However, the composition of the volume underwent a change. Cash-out refinances, which had comprised as much as 82% of the market over the past three years, fell from 55% in September to 38% the following month.