Fewer homeowners paused or reduced their mortgage payments in May, continuing the decline from April when the total number of loans in forbearance fell to a level below 1% of servicers’ portfolio volume.
The share of loans in forbearance dropped by 9 basis points to 0.85% in May from April’s 0.94%, according to the Mortgage Bankers Association (MBA).
The largest decline came from the portfolio loans and private-label securities (PLS) category, declining 29 basis points to 1.86%. Ginnie Mae loans in forbearance fell 4 basis points to 1.25% of the servicers’ total portfolio volume. Fannie Mae and Freddie Mac loans dropped 5 basis points to 0.38%.
At the end of May, 425,000 homeowners were in forbearance plans.
The pace of monthly forbearance exits in May reached a new survey low since June 2020, when the association first started tracking exits.
“Most borrowers exiting forbearance are moving into either a loan modification, payment deferral, or a combination of the two workout options,” said Marina Walsh, vice president of industry analysis at the MBA.
Mortgage servicers: If you’re not obsessed with customer service, you’re falling behind
In a world where disparate physical spaces are steadily merging in the central hubs of mobile devices, consumers consider their mortgages one more digital service in need of perfecting. To take full advantage of the current market conditions, lenders and servicers must obsess over customer service.
Presented by: TMS
Exits represented 0.19% of servicing portfolio volume in May and total forbearance requests represented 0.1%. The survey shows 28.2% of total loans in forbearance were in the initial plan stage last month and 58.6% were in a forbearance extension. The remaining 13.2% represented forbearance re-entries.
During the past 22 months, 29.4% of exits resulted in a loan deferral or partial claim, the MBA data shows. Less than 19% of borrowers continued to make their monthly payments during their forbearance period. About 17% of borrowers did not make their monthly payments and exited forbearance without a loss mitigation plan.
The overall servicing portfolio performance that is not delinquent or in foreclosure, posted 95.85% in May, 21 basis points higher than April’s 95.64%.
While it’s a positive sign to see improvement in shares of loans serviced, Walsh said it is worth monitoring if the rapid increase in interest rates for all loans “complicates post-forbearance workout options and puts additional pressure on borrowers in existing post-forbearance workouts.”