Forbearance mortgages fell for the fourth week in a row, with many Americans returning to work after being laid off or laid off.
Forbeared home loans represented 8.18% of agents’ portfolios for the week ending July 5, according to figures released Monday by the Mortgage Bankers Association. This is down from 8.39% for the week ending June 28 and 8.47% for the previous week. About 4.1 million homeowners are now on forbearance plans.
Homeowners often ask for forbearance in times of difficulty, when they cannot pay the interest on their mortgages. The abstention rate rarely exceeded 1% before the coronavirus pandemic.
Although many Americans returned to work last week, the MBA found that more than four in ten mortgagors in forbearance plans requested extensions beyond the original term. The percentage of Americans coming out of forbearance who requested deferrals – that is, borrowers who asked to defer their loan repayments to a later date – fell to just over 10%, against 16% the previous week.
Forbearance rates often vary among the types of institutions that keep mortgages on their balance sheets. Rates are generally higher for low interest, low credit loans issued by federal agencies and guaranteed by Ginnie Mae.
This week was different, however, as many of the loans guaranteed by Ginnie Mae were redeemed from the MBS Ginnie Mae pools by bank agents and passed on to bank balance sheets.
“These redemptions allow[d] managers to stop advancing principal and interest payments, and to work with borrowers in the hope that they can start paying again before they are re-securitized into the Ginnie Mae pools, ”said the MBA chief economist Mike Fratantoni in prepared remarks.
Because of this, Ginnie Mae’s abstention rate fell below that of wallet lenders or private labels for the first time since the coronavirus pandemic hit the United States. Ginnie Mae’s share of forbearance loans fell to 10.56% in the week ending July 5, down 116 basis points from the previous week. Meanwhile, the forbearance share for loans issued by portfolio lenders or purchased by private labels jumped to 10.93 percent, up 85 basis points from the previous week. This is the largest variation in abstention rates for loans from the two vintages for several months.
Mortgages bought by government-sponsored entities Fannie Mae and Freddie Mac saw abstention rates drop for the fifth week in a row to 6.07%, down 10 basis points from the previous week .