This post was originally published on this site

Posted on May 11th, 2020

The mortgage forbearance rate increased again last week, rising to 7.91% from 7.54% a week earlier, per the Mortgage Bankers Association (MBA).

That marked the smallest weekly increase (4.91%) since the newly-created Forbearance and Call Volume Survey was launched, but it’s important to remember it was only 0.25% back in March.

Additionally, the weekly gains just aren’t going to be headlines anymore because it’s hard to move the needle once millions are already in forbearance plans.

Still, it’s pretty clear we’re heading to 10% sooner or later, which is pretty remarkable and sure to stress a lot of loan servicers.

It’s also time to start thinking about more than just the next 12 months.

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Forbearance Rate Close to 11% for Ginnie Mae Loans

  • 10.96% of FHA/USDA/VA loans in forbearance
  • 6.08% of Fannie/Freddie loans in forbearance
  • 8.88% of private-label and portfolio loans in forbearance
  • Depositories (8.75%) faring worse than independent nonbanks (7.54%)

Once again, home loans backed by Ginnie Mae exhibited the worst forbearance rate at 10.96%, up from 10.45% a week prior.

Meanwhile, Fannie Mae- and Freddie Mac-backed mortgages saw forbearance creep up to 6.08% from 5.85%.

Private-label securities and portfolio loans fell in between those levels with a forbearance rate of 8.88%, up from 8.30%.

And depositories continue to fare worse than independent mortgage bank (IMB) servicers, otherwise known as nonbanks, which is relatively good news because the former have money on hand.

Keep in mind this includes data through May 3rd, possibly before we see a flood of forbearance requests for the month of May.

We’ll know more in a week, and potentially even more a week later, but there’s probably some time lag.

More importantly, some of the temporary layoffs we’ve heard about are becoming permanent, which could mean not only more forbearance, but bigger problems once the forbearance dries up.

Clearly that is going to manifest itself in these forbearance numbers at some point.

Calls to Loan Servicers Increased Last Week

  • Calls increased from 7.2% to 8.6% (as a percent of servicing portfolio volume)
  • Average time to answer up to 2.6 minutes to 2.4 minutes
  • Abandonment rate increased to 6.6% from 5.8%
  • Average call length 7.4 minutes from 6.9 minutes

It’s not just fear that forbearance rates will go up because it’s a brand-new month – we’re seeing it in the call volume numbers.

The report found that phone calls to loan servicers increased from 7.2% to 8.6%, as a percent of servicing portfolio volume.

And wait times, call times, and abandonment rates all increased after seeing some declines in prior weeks.

MBA Senior Vice President and Chief Economist Mike Fratantoni noted the loss of “more than 20 million jobs, and a spike in the unemployment rate to the highest level since the Great Depression.”

With more calls to loan servicers last week, it’s likely a sign that forbearance requests will also rise in coming weeks as these individuals seek assistance.

There aren’t many other reasons to call your loan servicer unless you’re curious about your annual escrow statement.

So expect a higher forbearance rate as the new month sinks in, and the unemployment numbers keep rising.

Housing Assistance Fund Coming Soon?

  • $75 fund would provide mortgage payment assistance post-forbearance
  • Could allow for principal reductions to those unable to resume mortgage payments
  • Would also provide assistance to prevent mortgage delinquencies and evictions
  • And help to pay core utilities like electric, gas, internet, and water

Separately, the MBA and National Association of Realtors (NAR) wrote a letter supporting recent proposed legislation that would fund emergency mortgage and rental assistance to those financially affected by coronavirus (COVID-19).

The goal is to ensure the more than 33 million Americans who have filed unemployment claims can remain in their homes.

Part of that legislation includes a $75 billion “Housing Assistance Fund” that would put money in the pockets of all state-level Housing Finance Agencies (HFAs).

It works off the Hardest Hit Fund (HHF), which Senators Sherrod Brown (D-OH) and Jack Reed (D-RI) unveiled back in 2010.

The funds could be used by the HFAs to help struggling households with mortgage payment assistance and utility payments to prevent eviction, mortgage delinquency, foreclosure, and so on.

It would also allow borrowers to receive a principal reduction after forbearance if they were unable to make regular mortgage payments.

This goes above the beyond the proposed partial claim for Fannie/Freddie loans that would set aside the missed payments until paid off or refinanced.

Ultimately, it appears lawmakers are now looking at this as more than just temporary, more than just the next six or 12 months.

And it makes sense that the MBA/NAR would support it to ensure the real estate market isn’t flooded with foreclosures, and lenders aren’t stuck with millions of mortgages in default.

Read more: How is mortgage forbearance paid back?

About the Author:

Before creating this blog, Colin worked as an account executive for a wholesale mortgage lender in Los Angeles. He has been writing passionately about mortgages for nearly 15 years.

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