Mortgage

Forbearance numbers drop as servicers put together to exit

COVID-related indulgences fell slightly in the last week of August as the industry prepares for several hundred thousand plans due to expire in September.

For the period August 25 through August 31, the volume of homeowners owed decreased by 53,000, according to Black Knight. Of these, 23,000 held loans funded by the Federal Housing Administration or Veterans Affairs, while 20,000 were supported by state-sponsored companies Fannie Mae and Freddie Mac. Another 10,000 portfolio and private mortgage loans have also dropped out of Forborne status. The decline comes after a slight increase in the middle of the month by 12,000 a week earlier.

“The week's decline was primarily due to typical month-end roll-offs, and with more than 80,000 mortgages still slated to expire in August 2021, additional month-end roll-offs are likely to be seen in next week's report as well Andy Walden, vice president of market research for Black Knight, said in an email response.

At the end of August, 1.71 million borrowers remained on COVID-related moratoriums, a 9% decrease – about 168,000 – from the previous month. This figure corresponds to 3.2% of the mortgage volume compared to 3.3% in the previous week. Approximately 5.6% of the FHA / VA, 1.8% of the GSE and 4% of the held and privately securitized loans were in active forbearance plans.

September will mark the end of CARES Act relief for many homeowners based on the legislation's allowable grace periods. This has led the mortgage industry to prepare for waves of exit. The safeguards introduced in March 2020 allowed homeowners to enter forbearance plans for up to 18 months with no questions asked. Of 629,000 plans to be reviewed for renewal and cancellation in September, almost 400,000 will reach their final plan terms based on current limits, according to Walden.

"There could be significant volume declines in the coming weeks as these plans reach their final expiration date and outgoing borrowers resume mortgage payments in October," he noted in a blog post.

While the vast majority of homeowners who left their plans early are currently doing their best, many of the outgoing borrowers are likely to need further assistance.

"It is fair to expect borrowers who require the full grace period to face greater challenges in getting back on their mortgage payments," said Walden.

The unpaid balance of tolerated loans was $ 331 billion, 2.7% less than $ 342 billion the previous week. FHA / VA mortgages backed by Ginnie Mae were $ 114 billion, down from $ 118 billion, while unpaid GSE balances fell from $ 110 billion to $ 106 billion. Portfolio and private label securities deferred mortgages had an unpaid balance of $ 111 billion, compared to $ 114 billion a week earlier.

In view of the high number of plans that are due to expire in September, increased service activities are likely to follow for several months.

"By and large, forbearance volumes are likely to decline noticeably over the next few months as early market entrants' plans expire, with the vast majority of active plans expiring in mid-2022," said Walden.

– Paul Centopani contributed to this story

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