Number of Mortgages in Forbearance Falls For First Time Since Crisis Began

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The total number of mortgages in COVID-19-related forbearance plans decreased for the first time since the crisis began during the week ended June 2, according to Black Knight.

“The first decline in the number of homeowners in active forbearance volumes is undoubtedly a good sign, particularly coming as it does on the heels of an overall trend of flattening inflow,” says Ben Graboske, president of Black Knight’s data and analytics division, in the firm’s most recent Mortgage Monitor report. “Of course, the shift from pipeline growth to pipeline management presents its own set of challenges for servicers and investors.”

The good news for mortgage servicers, Graboske says, is that nearly 80% of the borrowers in forbearance plans have 20% or more equity in their homes. This, he says, gives servicers “options for helping to avoid downstream foreclosure activity and default-related losses.”

About 9% of borrowers in forbearance plans have 10% or less equity in their homes and only about 1% are underwater, according to Black Knight’s data.

“Of course, this leaves a population of nearly half a million homeowners who may lack the necessary equity to sell their homes to avoid foreclosure in a worst-case scenario,” Graboske says.

“Looking at this population by investor, we see the share of low and negative equity borrowers in forbearance is much higher among FHA/VA loans,” he adds. “This segment – which has the highest forbearance rates overall – sees 19 percent of homeowners holding 10 percent or less equity in their homes.”

Last month’s Mortgage Monitor report revealed that nearly half of homeowners in forbearance plans made their April mortgage payments. However, as May 26, only 22% had made their May payments.

That means the national mortgage delinquency rate is likely to increase in May.

As of June 2, roughly 4.73 million homeowners – or 8.9% of all mortgages – were in COVID-19-related forbearance plans, according to Black Knight’s McDash report.

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