A majority of lenders last fall had less than 5 percent of residential mortgage loans in forbearance, though more than one-third saw higher forbearance rates, according to the Federal Reserve’s October 2020 “Senior Loan Officer Opinion Survey on Bank Lending Practices.”
The Federal Reserve’s quarterly survey included responses from 72 domestic banks and 22 U.S. branches and agencies of foreign banks. The Fed’s October survey included a special question on bank’s forbearance policies.
The survey showed that 59.7 percent of all banks surveyed and 44.6 percent of large banks had 5 percent or less of their residential mortgages receiving forbearance. Large banks were more likely to have forbearance rates above 5 percent, with 25.8 percent of all banks and 35.7 percent of large banks in that range. Another 10 percent of banks had forbearance rates between 10 and 20 percent.
Payment deferral was the most frequent forbearance option for residential mortgages, with 71.7 percent of banks responding that they very frequently incorporated payment deferrals into the forbearance terms. Reducing or waiving late fees was another common forbearance term, with 58.3 percent of banks saying they very frequently used this option.
The extent of the borrower’s financial hardship was very important to 60 percent of lenders when making decisions about forbearance, and somewhat important to another 18.3 percent of banks. The borrower’s relationship with the bank, however, was not important to nearly 60 percent of lenders, while about 12 percent said it was very important.
Banks were split as to whether the borrower’s payment history was an important factor in determining forbearance, with 38.3 percent each saying it was not important or somewhat important, while 23.3 percent said it was very important.
Forbearance remains an issue during the pandemic. Forbearance rates on residential mortgages had steadily declined since the summer, according to the Mortgage Bankers Association, but have remained stagnant in recent months.
For the weeks ending Jan. 10, 17 and 24, the MBA’s Forbearance and Call Volume Survey showed the total number of loans in forbearance between 5.37 and 5.38 percent of servicers’ portfolio volume. According to the MBA, an estimated 2.7 million homeowners are in forbearance plans.
“While new forbearance requests dropped slightly, the rate of exits from forbearance was at the slowest pace since MBA began tracking exit data last summer,” Mike Fratantoni, MBA’s senior vice president and chief economist, said in a statement announcing the Jan. 24 results. “Overall, the forbearance numbers have been little changed over the past few months. Homeowners still in forbearance are likely facing ongoing challenges with lost jobs, lost income and other impacts from the pandemic.”
