The number of forbearances has continued its steady decline this year and is now more than two-thirds below its 2020 high, as the end of the CARES bill's safeguards is expected to result in further cuts in September.
For the weekly period ended Sept. 7, deferred mortgages outstanding declined 92,000, a 5.4% decrease from the previous week's total, according to Black Knight. The numbers declined significantly across all asset classes, with portfolio and private label securities losing 40,000 deferred loans, 7.7% of the volume. Loan pools funded by government sponsored companies or borrowed through Federal Housing Administration or Veterans Affairs programs reduced their proportion of NPLs by 26,000, down 5.1% and 3.8%, respectively.
Andy Walden, vice president of market research at Black Knight, said the continued leakages in August and new activities in September were responsible for the larger weekly decline. A week earlier, the deferrals fell by 53,000.
"Additional activity is also expected later this month, with nearly 540,000 expansion / removal review plans planned for September," Walden said in a blog post. Of these, around 400,000 will expire the financial relief provided by the CARES law and make payments again in October.
However, portfolio and private label loans did not receive government protection, sometimes resulting in more volatile patterns compared to the other types of investments. However, the high percentage of drop-offs in the segment in the past week was more due to the expiration date, Walden said.
"It would not be too surprising to see that this group's behavior continues to differ from FHA / VA / GSE in the coming months, as they are not governed by uniform guidelines like HUD and FHFA for longer or shorter lengths than others," he said .
However, Walden pointed out that the monthly decline in forbearances in portfolio and private label securities was 6.4%, which is roughly what was seen in FHA / VA loans over the period, but less than that 9.5% decrease in GSE loans. "All in all, this group is 61% below its peak, compared to 66% for the market as a whole."
Unpaid bad loan balances were $ 313 billion, down 5.4% from $ 331 billion a week earlier. GSE mortgages in forbearance plans made $ 101 billion. Total unpaid balances on portfolio and private label loans was $ 103 billion, down 7.2% from $ 111 billion week-over-week.
Overall, the mortgages remaining in COVID-19-related forbearance plans totaled 1.62 million, down 7.4% or 129,000 from the previous month. The current volume of non-performing loans represents a 67% decrease from its peak of 3.1 million in May 2020. Forborne Loans account for 3.1% of the 53 million outstanding mortgage loans nationwide.
The share of forbearances in GSEs was 1.7% of their total volume, while distressed FHA / VA-backed loans accounted for 5.4% of the total volume in this segment. About 3.7% of the portfolio / PLS mortgages were in active deferral.