With many borrowers coming to the end of their forbearance terms, the latest Forbearance and Call Volume Survey from the Mortgage Bankers Association (MBA) revealed that the share of loans in forbearance dropped by 27 basis points week over week entering this month, falling to 2.62% as of Oct. 3.
According to Mike Fratantoni, MBA senior vice president and chief economist, this past week marked the fastest rate of decline for forborne U.S. mortgages since October 2020. It’s a key milestone, considering the swell of borrowers who entered forbearance plans during the COVID-19 pandemic, and the healthy track record of borrowers who have left forbearance since the pandemic started bodes well for the latest batch.
“Payment performance has remained steady for those who have exited forbearance into a workout since 2020, with more than 85% of those borrowers current as of October,” Fratantoni said. “It also continues to be striking that so many homeowners in forbearance have continued to make their payments. Almost 16% of borrowers in forbearance as of Oct. 3 were current.”
The MBA estimates some 1.3 million homeowners in forbearance plans. Among these, more than 77% are in a forbearance extension, while 13.3% are in initial plans and 9.2% are forbearance reentries.
The overall forbearance figure is set for more rapid declines: Zillow projected roughly 850,000 borrowers will exit these programs before November while Black Knight reported that more than 1 million loans are expected to exit forbearance in the next four months. Per Black Knight, 500,000 plans are slated for review in October, with an estimated 40% reaching their final expirations based on current agency guidelines.
Despite the disappointing employment report for September, Fratantoni expects many of the upcoming forbearance exits to go smoothly.
“Job growth was weaker than expected in September, reflecting the challenges from the delta variant, ongoing supply-chain issues, and the resulting slowdowns in workplace and school reopenings,” he said. “However, the drop in the unemployment rate, rising wages and abundant job openings will continue to help support the housing market, including helping borrowers exit forbearance successfully in the weeks ahead.”