Mortgage Loan Forbearance Rate Falls in February

A recent report from the Mortgage Bankers Association (MBA) showed that forbearance on mortgage loans in February decreased slightly. Total loans in forbearance fell month over month, from 0.64% in January to 0.60% last month. Fannie Mae and Freddie Mac loans in forbearance went down from 0.30% in January to 0.28% in February. During the same period, 1.28% of Ginnie Mae loans were in forbearance last month, down from 1.37% the previous month.

The total amount of loans in forbearance as a share of servicing portfolio volume as of February 28, 2023, is 0.60%, compared to 0.64% in the month of January, according to the MBA.

When the MBA examined loans in forbearance by stage, the group found that 34.9% of loans were in the beginning stages, 51.8% had extensions and 13.3% entered into forbearance again, including those with extensions.

The MBA also found that, of those that exited forbearance, 29.6% resulted in deferrals or a partial claim, 18% of borrowers were making their payments while in forbearance, 17.6% of borrowers exited forbearance without making all of their payments or putting a loss mitigation plan in place. 

For the rest of the loans exiting forbearance, 16.1% resulted in loan modification or a trial loan modification, according to the MBA, 10.9% were reinstated with past-due amounts to be paid back upon exiting forbearance, 6.6% were paid off either through refinancing or selling the house and 1.2% paid off through repayment plans, short sales, deed-in-lieus or other methods of payment.

According to the Consumer Finance Protection Bureau, forbearance allows borrowers to make reduced payments on their mortgages or stop making payments temporarily until they build back their finances. Depending on the type of loan, there may be no additional fees, penalties or interest and there may be no need for documentation in order to qualify.

Marina Walsh, CMB, the vice president of industry analysis for the MBA, said, “The February results on mortgage performance is welcome news, given recent increases in delinquencies for other credit types such as credit cards and auto loans. However, with the possibility of a recession this year, we may see some deterioration in performance — particularly for government loans.”