Number of Mortgages in Forbearance Jumps Nearly 1000%

Posted on April 7th, 2020
Number of Mortgages in Forbearance Jumps Nearly 1000%

While estimates have ranged from two million to 12.5 million, we’re now getting our first clues as to just how many homeowners will request mortgage forbearance from their loan servicer due to COVID-19.

And so far, it doesn’t look too good, which might be a result of the many mortgage relief programs being offered, along with the ease at which one can qualify under programs like the CARES Act.

Early Forbearance Numbers Look Pretty Grim

  • Total number of home loans in forbearance up to 2.66% from 0.25%
  • Mortgages backed by Ginnie Mae up to 4.25% from 0.19%
  • FHA, USDA, and VA loans faring the worst so far
  • Independent mortgage bank (IMB) servicers have largest share of loans in forbearance at 3.45%

A new survey from the Mortgage Bankers Association known as the “Forbearance and Call Volume Survey” paints a grim picture for the mortgage market in the face of COVID-19.

From March 2nd to April 1, 2020, the total number of home loans in forbearance increased from just 0.25% to 2.66%, or 964%.

The MBA’s survey data covers roughly 22.4 million serviced loans, which accounts for nearly half (45%) of the first-lien mortgage servicing market.

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So it should give us a pretty good idea of what’s happening out there.

By investor type, Ginnie Mae loans have fared the worst so far, with the forbearance rate climbing from 0.19% to 4.25%.

FHFA boss Mark Calabria actually called this one when he made his estimates last week.

Ginnie Mae securities are comprised of single-family home loans originated via the FHA, USDA’s Rural Development, and the VA.

All three of these types of home loans have very low credit score requirements, and USDA loans and VA loans require no down payment from the borrower.

These also happen to be the loans concentrated in the portfolios of independent mortgage bank (IMB) servicers, which may need a bailout to keep funds flowing to investors.

Overall, loans in forbearance as a percentage of servicing portfolio volume as of April 1, 2020 were as follows:

– IMBs: 3.45%
– Banks: 2.24%
– Total: 2.73%

So banks are doing a little bit better than nonbanks, and are also more equipped to handle forbearance requests.

If You Need Forbearance, Expect to Be on Hold for a Long Time

  • Hold times increased to 17.5 minutes from less than two minutes (3 weeks prior)
  • Abandonment rates (hanging up before receiving help) jumped to 25% from 5%
  • Forbearance requests surged 1,270% between March 2nd and March 16th
  • And another 1,896% between March 16th and March 30th

The MBA also noted that forbearance requests increased by a whopping 1,270% between the week of March 2nd and the week of March 16th, and an additional 1,896% between the weeks of March 16th and March 30th.

This might explain why the average hold time to speak to a loan servicer jumped from less than two minutes three weeks ago to 17.5 minutes.

And my guess is it’s only going to get longer as more and more homeowners realize they have options to stop paying their mortgage.

At the same time, call abandonment surged to 25% from 5% three weeks prior, a sign of growing frustration among borrowers.

Of course, it’s not hard to set the phone down and wait for someone to eventually pick up, especially when it involves suspending your mortgage payments for six months.

MBA Chief Economist Mike Fratantoni noted that while “the mortgage industry is committed to providing this much-needed forbearance as mandated by law under the CARES Act,” the government needs to step in and provide a “lending facility” to support single-family and multifamily loan servicers.

He expects forbearance requests “to skyrocket at an unsustainable pace in the coming weeks, putting insurmountable cash flow constraints on many servicers – especially IMBs.”

In other words, it’s fine that homeowners get mortgage relief, but many loan servicers won’t survive if they don’t receive payment assistance as well.

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