Despite a jump in the government lending sector, the total weekly forbearance rate fell 4 basis points and returned to levels not seen since the pandemic began, according to the Mortgage Bankers Association.
At 2.96%, the overall suspension rate fell from 3% a week earlier, back to March 2020 levels, but the equivalent of loans wrapped in Ginnie Mae securities rose 3 basis points to 3.42%, indicating a focus of distress amid broader declines. A little more than half of all borrowers either left their current deferral plans or were able to resume their normal payments and defer payments until their loans ended. A little more than 16% of the exits were long-term loans with no loss mitigation, another 11.76% were modifications. Most of the other exits were loans that were taken back or paid off.
As the forbearance associated with CARES expires and foreclosure restrictions persist through the end of the year, mortgage companies are preparing for exits that will require different types of operating assignments than during the last such business cycle, said Nate Johnson, executive vice president, Interview with mortgage banking at SLK Global Solutions.
“Homeowners now have a lot more equity and not many people are going to leave their properties. So when it comes to all of the recovery solutions that people used 10-12 years ago, they have to change the mix, ”he said. "The short-term service expense will be much lower for foreclosure functions than for loan modification work as borrowers want to stay in their home."
In addition to government insured or guaranteed loans, mortgage service providers may need to allocate relatively more resources contained in bank portfolios or private label securities. While the forbearance rate for portfolio and PLS loans has fallen from 6.95% last week to 4 basis points to 6.91%, it is still relatively high, in part because the category includes many NPLs coming from Ginnie Mae pools were purchased. By comparison, loans bought by the state-sponsored Fannie Mae and Freddie Mac had a deferral rate of 1.44%, which was 3 basis points lower than a week earlier.
The MBA figures reflect the September 13-19 period and a sample of 25 independent mortgage companies, 21 banks and two sub-contractors, who represent 74% of the high-quality home loan market.