Forbearance rate remained flat in November

The forbearance rate held steady in November, but there are signs of deterioration in the portfolios of servicers. 

The Mortgage Bankers Association (MBA) reported Monday that the total number of loans in forbearance remained at 0.70% of the servicers’ total portfolio volume in November. There were 350,000 U.S. homeowners in forbearance plans as of November 30, up from 345,000 at the end of September. 

With the COVID-19 federal health emergency still in effect, borrowers can continue to seek initial COVID-19 hardship forbearance. Homeowners can also get a forbearance plan due to natural disasters or other causes. 

“There were pockets of weakness in the November data, despite the forbearance rate remaining unchanged and the overall loan performance of serviced loans staying mostly flat,” Marina Walsh, MBA’s vice president of industry analysis, said in a statement.

Red flags have been raised for Ginnie Mae loans in forbearance, which increased for the fourth consecutive month to 1.46% in November, up five basis points compared to one month prior. 

The percentage of Fannie Mae and Freddie Mac loans in forbearance also increased in November by a single basis point to 0.32%. Meanwhile, portfolio loans and private-label securities (PLS) dropped six bps from the previous month, ending November at 0.97% of the servicers’ total portfolio volume. 

“With many indicators pointing to a recession and higher unemployment in 2023, many of the most vulnerable homeowners will be those with FHA, VA, or other government loans. Loss mitigation options may help to ease the financial hardship for these homeowners,” Walsh said. 

According to the MBA data, 95.69% of all serviced loans were current last month, which means not delinquent or in foreclosure. It fell one basis point from October.

The survey showed that 37.8% of loans in forbearance were in the initial plan stage last month, and 50.1% were in a forbearance extension. The remaining 12.1% represented re-entries.  

From June 2020 to November 2022, MBA data found that 29.7% of forbearance exits resulted in a loan deferral or partial claim, while 18.2% of borrowers continued to pay during the forbearance period. However, about 17.3% were borrowers who did not make their monthly payments and did not have a loss mitigation plan.