With the exception of the stock market, sometimes it’s good news when the numbers go down. According to the Mortgage Bankers Association (MBA), the number of mortgages in forbearance fell for the sixth straight week, hitting 7.74 percent.
What is Mortgage Forbearance?
Fitch Ratings describes forbearance in the following terms:
“Generally, mortgage forbearance programs have allowed borrowers to shift the skipped monthly principal and interest payments onto the end of their mortgage payment schedules. This finite payment holiday has provided homeowners greater liquidity and increased capacity to pay down other debt such as credit cards and auto loans that generally have shorter forbearance options. This, along with government stimulus and deferred tax payments, may have contributed to better than expected credit performance of credit card and auto loan portfolios in 2Q20.”
MBA’s Ryan Smith writes, “The latest Forbearance and Call Volume Survey found that the total share of loans in forbearance had dropped six basis points to 7.74% as of July 19, down from 7.8% the prior week. MBA estimated that 3.9 million homeowners are currently in forbearance plans.”
He explains how the share of Fannie Mae and Freddie Mac loans in forbearance fell to 5.49%, a 15-basis-point improvement.
“It was the seventh week in a row that the share of Fannie and Freddie loans in forbearance dropped,” writes Smith.
Not All Numbers Fell
All is not yet rosy, however, as the percentage of loans in forbearance for depository servicers fell to 8.06%, while the percentage of loans in forbearance for independent mortgage bank servicers rose to 7.85%.
He quotes MBA’s Mike Fratantoni, who says, “The share of loans in forbearance declined by a smaller amount than in previous weeks, as the pace of borrowers exiting forbearance slowed. Although the GSE portfolio of loans in forbearance should continue to improve, Ginnie Mae’s portfolio saw an uptick of both loans in forbearance and borrowers requesting forbearance. The high level of unemployment claims in recent weeks may be playing a role, as weakness would likely impact Ginnie Mae’s portfolio first.”