Mortgage Forbearance Sees Biggest Drop Since Cares Act Became a Law

A significant part of active forbearance plans slated to expire in June has not been extended, leading to the biggest weekly drop  (435,000) in the volume of mortgage borrowers under forbearance. 

Andy Walden, Black Knight’s Economist and Director of Market Research, suggested that “this latest decline in the number of homeowners in active forbearance is an encouraging sign of continued improvement”. Notably, those servicing government-guaranteed loans were asked for by the government relief stimulus to grant residential borrowers an extension of forbearance, in case they asked for it. 

For the week ending June 30, 4.57 million borrowers, which is 8.6% of total mortgages, were under forbearance. This number fell to 4.14 million or 7.8% for the week ending July 7. Black Knight reveals that the fall is unprecedented since 28th April. The ‘Fannie’ and ‘Freddie’ share of loans in forbearance is relatively lesser at 6%, compared to the government-guaranteed loans’ 11.6%.

Computershare Loan Services US’s CEO Tom Milton reveals that many borrowers had sought forbearance expecting tough times to hit them. In the event of the situation not turning out as badly, they started making payments. To again paraphrase Milton, some borrowers, though capable of meeting mortgage liabilities, had sought Forbearance because they were wary of Corona-induced uncertainties. 

Specialized Loan Servicing, whose parent company is Computershare Loan Services US, divulges through its separate report that 27% borrowers utilizing forbearance relief had paid their mortgages in June. In what can be accepted as another positive turn, both MGIC and Radian have confirmed fewer delinquency reports in June, in comparison to May.

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