Active indulgence increased slightly in mid-August as the industry eagerly awaits what September has in store when large numbers of borrowers hit their limit of COVID-related relief.
The upward trend towards mid-August was fueled by a higher number of distressed portfolios and privately securitized loans. Unlike loans backed by the US government or GSEs, portfolio and PLS loans did not receive the same CARES Act protection.
For the weekly period ended August 24, the number of active indulgences increased 12,000, one week after increasing 11,000. The lion's share of the increase was made up of portfolio and private label securitized mortgages, adding 10,000 distressed borrowers. Mortgages secured by the Federal Housing Administration or Veterans Administration also added, with their numbers increasing by 3,000, while deferred loans from Fannie Mae and Freddie Mac offset the jumps in other categories and declined by 1,000.
Mid-month increases have become common during the pandemic, as plan cancellations typically occur in the first half of each month and, according to the data and analysis provider, lead to a higher recovery volume in the following weeks.
But even with the weekly increase, the total COVID-related forbearance numbers were 132,000 lower from the same week in July, a 7% decrease from the previous month. With more than 150,000 plans to be reviewed the last week of August, more improvements could be underway this month. In the next month, the number is expected to continue to rise.
"That number climbs to nearly 670,000 in September, however, with 415,000 of those plans reaching their final expiration next month based on the current length of grace periods," Andy Walden, vice president of market research at Black Knight, wrote in a statement on the report .
The protective measures under the CARES Acts initially consisted of six months of forbearance, followed by up to two extension periods. Those who initiated the moratorium immediately after the offer in March 2020 are nearing the end of the second extension.
"How these exits manifest will tell us a lot about what to expect for the rest of 2021," noted Walden.
With federal moratoriums on foreclosures ending in late July, the extent of the challenges homeowners in distress may face will depend largely on government orders. Meanwhile, the Consumer Financial Protection Bureau is doing what it can to fend off a wave of foreclosures.
To date, 1.76 million homeowners remain on CARES Act-related moratorium plans. Of these, 1.9% are held in government sponsored companies, 5.8% are either FHA or VA backed, and 4.1% are portfolio or privately securitized mortgages. Forborne loans account for 3.3% of total outstanding mortgages, the same percentage as the previous week.
The unpaid balance of tolerated loans was $ 342 billion, up from $ 340 billion the previous week. As in the previous reporting period, GSE loans accounted for USD 110 billion of this. Forborne FHA / VA loans stood at $ 118 billion, down from $ 117 billion a week earlier, while Portfolio / PLS mortgages rose from $ 112 billion the previous week to $ 114 billion.
Forbearance data comes from Black Knight's daily McDash Flash tracker, which tracks numbers from service providers representing nearly 70% of the US mortgage market.