The industry is now less than two weeks away from the one-year anniversary of the CARES Act, which provided borrowers with federally backed mortgages the option to receive forbearance for up to 180 days.
After many extensions and exits, the Mortgage Bankers Association estimates 2.6 million homeowners are still in some form of forbearance, though that number continues to slowly fall. As of March 7, servicers’ forbearance portfolio volume sits at 5.14% – down six basis points from the week prior.
Overall, forbearance share managed to drop or go unchanged in every loan type for the first week of march, with Fannie Mae and Freddie Mac once again boasting the smallest share after servicers’ portfolios declined six basis points to 2.88%.
Ginnie Mae loans in forbearance experienced the greatest drop, down 12 basis points to 7.16%, while the forbearance share for portfolio loans and private-label securities (PLS) remained unchanged relative to the prior week at 9.05%.
One year after the onset of the pandemic, many homeowners are approaching 12 months in their forbearance plan. That’s likely because servicers’ call volumes hit its highest peak since April 2020, and forbearance exits increased to the highest level since January, said Mike Fratantoni, M(BA)’s senior vice president and chief economist.
How to make the forbearance process effective
To accommodate the large volume of loans still in forbearance, mortgage servicers must have functional, flexible and effective processes in place. Here are some actionable steps to create that process.
Presented by: FICS
Of the cumulative forbearance exits for the period from June 1, 2020, through March 7, 2021, 27.3% represented borrowers who continued to make their monthly payments during their forbearance period, however, that number has slowly decreased for months now. On the other end of the spectrum, borrowers who did not make all of their monthly payments and exited forbearance without a loss mitigation plan in place, rose to 14.1%.
But homeowners now have more time than ever to catch up. The FHFA recently extended forbearance plans an additional three months past beyond their initial 12 month expiration. With the latest edict, the agency is now allowing borrowers up to 18 months of coverage. This means that some borrowers may now be in forbearance through Aug. 31, 2022.
Borrowers who are in forbearance the longest though, are statistically shown to be more likely in distress. Courtney Thompson, senior vice president of default mortgage at Flagstar Bank told HousingWire that servicers have to, right now, flip their programs, and meaningfully connect with the majority of their COVID-19 impacted population.
COVID-19 forbearances at the end of last summer saw nearly 40% to 50% of those consumers still able to make their regular monthly mortgage payment and avoid delinquency.
“If you look at the same group of consumers now,” Thompson said. “We’re down to about 10% that are still making their regular monthly mortgage payment. So we can focus on the population. It’s a smaller population than it was last fall, but it’s a more needy population.”