Sharp lower in forbearance charges recorded when credit score exits CARES Act plans

According to the Mortgage Bankers Association, the rate of coronavirus-related mortgage indulgence plunged massively again, falling 40 basis points between October 5th and 11th.

This was followed by a drop of 49 points compared to the previous week. Forbearance mortgages account for 5.92% – about 3 million – of all outstanding loans, compared with 6.32% and 3.2 million a week earlier. The proportion of forborne lending to independent mortgage lenders fell from 6.65% to 6.33%, while custodians saw the largest decrease, going from 6.53% to 5.93%. It's the first time since the week leading up to April 12 that the overall rate has fallen below 6%.

As with the sharp drop the week before, the drop in the rate from October 5th to 11th is largely due to the expiration of the CARES Act forbearance plans. Government-secured mortgage payments can be deferred for 12 months if borrowers have faced coronavirus. However, these consumers must contact their servicer to initiate or renew these plans.

Forbearance rates fell for each type of loan. The proportion of compliant mortgages purchased by Fannie Mae and Freddie Mac decreased from 4.03% to 3.77% for the 19th straight week. Ginnie Mae loans – Federal Housing Administration, Department of Veterans Affairs, and U.S. Department of Agriculture Rural Housing products – declined from 8.27% to 8.14%.

"The steady improvement in Fannie Mae and Freddie Mac loans underscores the improvement in some segments of the labor market and the wider economy," said Mike Fratantoni, senior vice president and chief economist of MBA, in a press release. "The slower decline in Ginnie Mae loans continues to show that this improvement has not been consistent and that many are still struggling to get back on their feet."

Forgiving private label stocks and portfolio loans – products not covered by the Coronavirus Relief Act – fell from 10.06% to 8.86%.

A share of 26.32% of all forborne mortgages is in the initial forbearance phase, 72.08% have been switched to extended plans, while the remaining 1.6% are back to forbear after a previous exit.

Forbearance requests as a percentage of the service portfolio volume decreased from 0.11% to 0.1%, while the call center volume as a percentage of the portfolio volume decreased from 8.8% to 8.2%.

The MBA sample for this week's survey includes a total of 51 servicers with 26 independent mortgage lenders and 23 custodians. The sample also included two subservicers. Based on the number of units, respondents accounted for around 75% or 37.3 million of the outstanding first liens.

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