The slowed decline in forbearance displays an uneven restoration

After two straight weeks of sharp declines, coronavirus-related indulgence mortgages fell just 2 basis points between October 12 and 18, according to the Mortgage Bankers Association.

This was followed by a decrease of 49 points and 40 points compared to the two weeks before. Home loans in forbearance plans account for 5.9% – about 3 million homeowners – of all outstanding mortgages, down from 5.92% from the previous week. The proportion of forborne loans held by independent mortgage lenders actually increased from 6.33% to 6.35% from 6.65%, while depositaries fell from 5.93% to 5.86%.

Borrowers falling outside of the six-month coronavirus grace period as required by CARES law were responsible for the majority of two large previous declines. The CARES Act dictates that the forbearance can be extended for an additional six months after the initial period. However, borrowers need to contact their servicer to get them.

Overall, the one-sided improvement in the number of indulgences reflects the pace of recovery in the overall economy.

"There is still steady improvement for Fannie Mae and Freddie Mac loans, but the leniency rate for Ginnie Mae, portfolio and PLS loans has increased," said Mike Fratantoni, senior vice president and chief economist of the MBA, in a press release . "This is further evidence of the inequality in the current economic recovery. The housing market is booming, as evidenced by the extremely strong pace of home sales over the past week. However, many homeowners continue to struggle with the pace of improvement in the labor market."

The percentage of compliant mortgages purchased by Fannie Mae and Freddie Mac decreased from 3.77% to 3.72% for the 20th straight week. Ginnie Mae's loans – Federal Housing Administration, Department of Veterans Affairs, and Department of Agriculture – rose from 8.14% to 8.17%.

Forbearance private label securities and portfolio loans – products not covered by the Coronavirus Relief Act – also rose from 8.86% to 8.9%.

A share of 25.02% of all forborne mortgages is in the initial forbearance phase, while 73.14% have switched to extended plans and the remaining 1.84% have returned to forbear after the previous exit.

Forbearance requests as a percentage of the service portfolio volume increased from 0.1% to 0.11%, while the call center volume as a percentage of the portfolio volume increased from 8.2% to 8.9%.

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. In relation to the number of units, the respondents accounted for around 75% or 37.3 million of the outstanding first liens.

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