Some banks are moving mortgages in forbearance back onto their balance sheets to avoid having to advance principal and interest payments to investors, according to the Mortgage Bankers Association.
The MBA’s latest Forbearance and Call Volume Survey showed that that the total number of loans in forbearance decreased by 21 basis points from 8.39 percent of servicers’ portfolio volume in the prior week to 8.18 percent as of July 5. The MBA estimates that 4.1 million homeowners are in forbearance plans.
Ginnie Mae loans in forbearance decreased 116 basis points to 10.56 percent, while the forbearance share for portfolio loans and private-label securities increased by 85 basis points to 10.93 percent. These changes show loans in forbearance being bought out of Ginnie Mae pools and into bank portfolios, the MBA said.
“The share of loans in forbearance continues to decrease, as more workers are brought back from temporary layoffs. However, our survey reveals a notable shift in the location of many FHA and VA loans, which have been bought out of Ginnie Mae pools – predominantly by bank servicers – and moved onto bank balance sheets,” Mike Fratantoni, MBA’s senior vice president and chief economist, said in a statement. “As a result, there was a sharp drop in the share of Ginnie Mae loans in forbearance, and an offsetting increase in the share of portfolio loans in forbearance.”
Fratantoni said the buyouts allow servicers to stop advancing principal and interest payments on loans in forbearance, instead working “with borrowers in the hope that they can begin paying again before they are re-securitized into Ginnie Mae pools.”
The share of Fannie Mae and Freddie Mac loans in forbearance dropped for the fifth week in a row to 6.07 percent, a 10-basis-point improvement. The percentage of loans in forbearance for depository servicers dropped to 8.8 percent, while the percentage of loans in forbearance for independent mortgage bank servicers decreased to 8.10 percent.
More than 40 percent of the loans have extended forbearance, while others have started to exit, Fratantoni said.
“Forty-three percent of loans in forbearance are now in an extension following their initial forbearance term, while more than 10 percent of borrowers entered into a deferral plan to exit forbearance – down from 16 percent the week prior,” Fratantoni said. “For those exiting forbearance over the next several months, we expect to see many of the borrowers with GSE loans to utilize the deferral option.
