Share of Mortgage Loans in Forbearance Drops in July


The total number of loans in forbearance decreased by 5 basis points from 0.44% of servicers’ portfolio volume in the prior month to 0.39% as of July 31. Those numbers are revealed in the most recent Mortgage Bankers Association’s (MBA) monthly Loan Monitoring Survey.

According to MBA’s estimate, 195,000 homeowners are in forbearance plans. Mortgage servicers have provided forbearance to approximately 7.9 million borrowers since March 2020.

In July, the share of Fannie Mae and Freddie Mac loans in forbearance decreased 1 basis point to 0.2%. Ginnie Mae loans in forbearance decreased 13 basis points to 0.8%, and the forbearance share for portfolio loans and private-label securities decreased 7 basis points to 0.45%.

“The prevalence of forbearance plans has dramatically dropped since 2020, and the reasons that borrowers are in forbearance are changing,” says Marina Walsh, CMB, MBA’s vice President of industry analysis. “About two-thirds of borrowers are still in forbearance because of the effects of COVID-19, but a growing share of borrowers are in forbearance for other reasons that cause temporary hardship such as financial distress or natural disasters.”

Adds Walsh: “Given the recent natural disasters impacting California, Washington and Hawaii, forbearance is one way for mortgage servicers to mitigate the potential impacts on homeowners.”

Some Key Findings of MBA’s Loan Monitoring Survey:

  • Loans in forbearance as a share of servicing portfolio volume (#) as of July 31:
    • Total: 0.39% (previous month: 0.44%)
    • Independent Mortgage Banks: 0.48% (previous month: 0.56%)
    • Depositories: 0.30% (previous month: 0.32%)
  • By reason, 69.3% of borrowers are in forbearance because of COVID-19. Another 6.5% are in forbearance because of a natural disaster. The remaining 24.2% of borrowers are in forbearance for other reasons such as a temporary hardship caused by job loss, death, divorce, disability, etc.
  • By stage, 36.5% of total loans in forbearance are in the initial forbearance plan stage, while 53.3% are in a forbearance extension. The remaining 10.3% are forbearance re-entries, including re-entries with extensions.

MBA’s monthly Loan Monitoring Survey represents 65% of the first-mortgage servicing market (32.7 million loans).

Photo by aleskrivec on Freepik.

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