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With the first of two six-month forbearance periods available through the CARES Act ending, some borrowers have been exiting forbearance without contacting their mortgage servicers, one factor contributing to a recent drop in loan forbearances, according to the Mortgage Bankers Association.
The total number of loans in forbearance decreased by 49 basis points, from 6.81 percent of servicers’ portfolio volume in the prior week to 6.32 percent as of Oct. 4, according to the MBA’s latest Forbearance and Call Volume Survey. An estimated 3.2 million homeowners are in forbearance plans.
The survey showed that the share of Fannie Mae and Freddie Mac loans in forbearance dropped for the 18th week in a row to 4.03 percent, a 36-basis-point improvement.
Ginnie Mae loans in forbearance decreased 89 basis points to 8.27 percent, while the forbearance share for portfolio loans and private-label securities decreased by 33 basis points to 10.06 percent. The percentage of loans in forbearance for depository servicers decreased 50 basis points to 6.53 percent, and the percentage of loans in forbearance for independent mortgage bank servicers decreased 54 basis points to 6.65 percent.
“The share of loans in forbearance declined across all loan types. With the forbearance program for federally backed loans under the CARES Act reaching the six-month mark, many borrowers saw their forbearance plans expire because they did not contact their servicer,” Mike Fratantoni, MBA’s senior vice president and chief economist, said in a statement. “Another reason for expirations was that borrower information needed to determine an appropriate loss mitigation option was not yet in place. Borrowers with federally backed mortgages need to contact their servicer to obtain another six months of reprieve if they are still impacted by the pandemic. As of now, some borrowers are exiting forbearance without making contact or without a plan in place.”
Fratontoni added that servicers have been reaching out to these borrowers to determine the best options, including an extension. Phone calls to mortgage servicers related to forbearance increased as well, from 6.8 percent of servicing portfolio volume to 8.8 percent, according to the survey.
Overall, 25.5 percent of loans in forbearance are in initial forbearance, while 72.97 percent are in a forbearance extension. Another 1.53 percent are forbearance re-entries.
“On a more positive note, nearly two-thirds of borrowers who exited forbearance remained current on their payments, repaid their forborne payments, or moved into a payment deferral plan,” Fratantoni said. “All of these borrowers have been able to resume – or continue – their pre-pandemic monthly payments.”
