Although the mortgage industry has been hard hit with the influx of borrowers requesting relief from payments, MBA’s data indicates that the wave of forbearance requests may be gradually starting to wane.
As of May 10, 8.16 percent of all mortgages were in forbearance, with borrowers permitted to either skip or make reduced mortgage payments. That percentage rose from 7.91 percent as of May 3 — however, that was the slightest increase in proportion of borrowers in forbearance since March. Requests for forbearance also declined from 0.52 percent of total mortgage volume to 0.32 percent.
“There has been a pronounced flattening in loans put into forbearance — despite April’s uniformly negative economic data, remarkably high unemployment, and it now being past May payment due dates,” Mike Fratantoni, chief economist for MBA, said in a statement.
However, there’s reason to suggest that loans backed by Ginnie Mae, including Federal Housing Administration (FHA) and Veterans Affairs (VA) loans, have been impacted to a greater degree. These loans are often awarded to borrowers who are first-time homebuyers and likely have weaker credit — individuals, therefore, who may be more at-risk of facing financial hardship as a result of the economic downturn. Over 11 percent of Ginnie Mae loans are currently in forbearance.
Although recent data from Oxford Economics, a U.K.-based economic forecasting firm, estimated that 15 percent of homeowners would ultimately fall behind on mortgage payments, the slowing rate of forbearance requests is a positive sign. In addition, the consecutive increase in purchase applications over the past four weeks indicates that housing demand is bolstering as more states take steps to slowly reopen their economics, MBA’s report noted.
“We will continue to closely monitor the forbearance request and call volume data for any sign of an uptick, but current trends suggest that if the economy continues to gradually reopen, the situation could be stabilizing,” Fratantoni said.