Updated December 2020
Mortgage forbearances for homeowners affected financially by the pandemic declined slightly over the past week. Black Knight said that there were 200,000 plans scheduled to expire at the end of November, probably accounting for the majority of the 39,000-loan downturn in the various forbearance programs. Another 1 million plans are due to expire at the end of this month.
As of December 1, there were a total of 2.76 million loans remaining in plans, 5.2 percent of the 53 million active mortgages in servicer portfolios and representing $561 billion in unpaid principal. Eighty-one percent of those loans have had their terms extended at some point since March.
The number of GSE (Fannie Mae and Freddie Mac) loans in forbearance dropped by 25,000 during the week, leaving a total of 967,000 homeowners remaining in plans. This is 3.5 percent of the companies’ combined portfolios. FHA and VA loans decreased by 14,000 units to a total of 1.118 million or 9.2 percent of those loans. Loans serviced for bank portfolios or private label securities held steady at 677,000 loans or 5.2 percent of the total. There are 91,000 fewer loans in forbearance plans than one month ago, a 3.2 percent decline.
Originally, some housing industry analysts were concerned that the mortgage forbearance program (which allows families to delay payments to a later date) could lead to an increase in foreclosures when forbearances end. Some even worried that we might relive the 2006-2008 housing crash all over again. Once you examine the data, however, that seems unlikely.
As reported by Odeta Kushi, Deputy Chief Economist for First American:
“Despite the federal foreclosure moratorium, there were fears that up to 30% of homeowners would require forbearance, ultimately leading to a foreclosure tsunami. Forbearance did not hit 30%, but rather peaked at 8.6% and has been steadily falling since.”
According to the most current data from Black Knight, the percentage of homes in forbearance has fallen to 7.4%. The report also gives the decrease in raw numbers:
“The overall trend of incremental improvement in the number of mortgages in active forbearance continues. According to the latest data from Black Knight’s McDash Flash Forbearance Tracker, the number of mortgages in active forbearance fell by another 71,000 over the past week, pushing the total under 4 million for the first time since early May.”
Here’s a graph showing the decline in forbearances over the last several months: The report also explains that across the board, overall forbearance activity fell with 10% fewer new forbearance requests and nearly 40% fewer renewals.
Kushi also addresses this question:
“There are two main reasons why this crisis is unlikely to produce a wave of foreclosures similar to the 2008 recession. First, the housing market is in a much stronger position compared with a decade ago. Accompanied by more rigorous lending standards, the household debt-to-income ratio is at a four-decade low and household equity near a three-decade high. Indeed, thus far, MBA data indicates that the majority of homeowners who took advantage of forbearance programs are either staying current on their mortgage or paying off the loan through a home sale or a refinance. Second, this service sector-driven recession is disproportionately impacting renters.”
Today, the options available to homeowners will prevent a large spike in foreclosures. That’s good not just for those families impacted, but for the overall housing market. A recent study by Fannie Mae, however, reveals that many Americans are not aware of the options they have.
It’s imperative for potentially impacted families to better understand the mortgage relief programs available to them, for their personal housing situation and for the overall real estate market.
If Americans fully understand their options and make good choices regarding those options, the current economic slowdown does not need to lead to mass foreclosures.