7.7% of Mortgages Now in Forbearance

As of May 7, nearly 4.1 million homeowners are in forbearance plans, representing 7.7% of all active mortgages, according to the latest forbearance data from Black Knight.

They account for $890 billion in unpaid principal and includes 6.4% of all GSE-backed loans and 11% of all FHA/VA loans. At today’s level, mortgage servicers need to advance a combined $4.5 billion/month to holders of government-backed mortgage securities on COVID-19-related forbearances. Another $2.1 billion in lost funds will be faced each month by those with portfolio-held or privately securitized mortgages (some 7.2% of these loans are in forbearance as well).

Reminder: FHFA has said that P&I advance payments will be capped at four months for servicers of GSE-backed mortgages. Given today’s number of loans in forbearance, servicers of GSE-backed loans face $8 billion in advances over that four-month period. There is no such cap on the additional $800 million in monthly T&I advances.

According to Black Knight CEO Anthony Jabbour, the recent Federal Housing Finance Agency (FHFA) announcement of a four-month limit on advance obligations for servicers of mortgages backed by Fannie Mae and Freddie Mac provides the industry with some much-needed clarity.

“Having a four-month end date on the period in which servicers need to advance principal and interest payments on behalf of homeowners in forbearance is extremely helpful to our servicing clients,” said Jabbour. “Still, even knowing that time limit, with today’s number of forbearance plans, servicers are still looking at more than $7 billion dollars in advances over those four months. And the forbearance numbers are climbing steadily, day by day. Clearly, this remains a challenging situation all around.”

With dramatic increases in unemployment, delinquencies and defaults can be expected to increase for the foreseeable future, even during forbearance, Black Knight notes.

From Black Knight Mortgage Monitor dated May 4th.
“After surging at the beginning of April and then rising again near the 15th – when most mortgages become past due and late fees are charged – the number of new forbearance requests has declined in recent weeks,” said Graboske. “While total forbearance volumes continue to mount, daily inflow has begun to taper off. Between 53,000 and 102,000 new plans have been put into place over each of the last nine days, and even the largest single-day volume was less than a quarter of what we saw at the start of April – and may see again next week. What remains an open question at this point is to what degree forbearance requests will look like at the beginning of May – when the next round of mortgage payments become due, and with nearly 30 million Americans newly unemployed in the last month. Once we have a sense for whether there is a similar spike in forbearance requests around the beginning of May, we’ll be in a much better position to more accurately forecast possible scenarios.

“As it is, in an optimistic scenario in which daily forbearance volumes continue to decline by 10% per day, the number of forbearances could peak at approximately 4.5 million in the coming months. Should current forbearance volumes hold steady through mid-June, more than 8 million homeowners could enter into forbearance plans, representing 16% or more of all mortgages. If that adverse scenario holds true, servicers would be required to advance $4 billion in monthly principal and interest (P&I) payments on GSE mortgages alone. Even under the FHFA’s recent four-month limit on P&I advances, servicers would still be bound to make $16 billion in advance payments over that time span.”