Forbearance Plans Continue Trending Down
Written By: Joel Palmer, Op-Ed Writer
The number of mortgage loans in forbearance continue to trend downward since peaking in May 2020, but remain higher than pre-pandemic levels.
The Federal Housing Finance Agency (FHFA) recently released its fourth quarter 2021 Foreclosure Prevention and Refinance Report. The report shows that, as of December 31, 2021, there were 178,019 enterprise loans in forbearance, representing 0.59 of Fannie Mae’s and Freddie Mac’s single-family book of business. That was down from more than 320,000 in forbearance, 1.07 percent of loans, in the third quarter of 2021.
Approximately 27 percent of these loans have been on the plan for more than 12 months.
Initiated forbearance plans decreased to 72,146 in the fourth quarter from 75,201 in the third quarter of 2021.
The volume of loans in forbearance have steadily declined since peaking at 1.45 million in May 2020 at the peak of the COVID-19 pandemic. Still, the 178,000 loans currently in forbearance are still considerably higher than the 9,000 loans in a forbearance plan in the months prior to the pandemic.
Additional highlights of the latest report include:
The enterprises completed 153,793 foreclosure prevention actions in the fourth quarter. That was a decrease from 180,566 in the previous quarter.
Nearly half (46 percent) of the loan modifications done in the fourth quarter reduced borrowers’ monthly payments by over 20 percent. Eleven percent of modifications in the fourth quarter were modifications with principal forbearance. Modifications with extend-term only accounted for 67 percent of all loan modifications during the quarter.
The number of refinances decreased slightly from 1.286 million in the third quarter to 1.266 million in the fourth quarter amid rising mortgage rates.
The percentage of borrowers refinancing into shorter term 15-year fixed rate mortgages decreased to 24 percent in December as the difference between 15-and 30-year fixed rate mortgages remained in the 69 to 76 basis point range in recent months through November. In December, the difference between 15-and 30-year fixed rate mortgages increased to 75 basis points.
The Enterprises’ serious delinquency rate dropped from 1.55 percent to 1.19 percent at the end of the fourth quarter. This compares with 6.48 percent for Federal Housing Administration (FHA) loans, 3.82 percent for Veterans Affairs (VA) loans, and 2.83 percent for all loans (industry average).
The number of foreclosure starts decreased 15 percent to 6,178, while third-party and foreclosure sales rose 27 percent to 3,213 in the fourth quarter.
The enterprises’ Real Estate Owned (REO) inventory increased 10 percent from 8,001 in the third quarter to 8,781 in the fourth quarter, as REO acquisitions outpaced property dispositions. The total number of property acquisitions increased 29 percent to 1,751, while dispositions decreased 17 percent to 991 during the quarter.
About the Author
As an NAMU® Opinion Editorial Contributor, Joel Palmer is a freelance writer who spent 10 years as a business and financial reporter and another 10 years in marketing for the insurance and financial services industries. He regularly writes about the mortgage industry, as well as residential and commercial real estate, investments, and retirement income planning. He has also ghostwritten books on starting a business, marketing, and retirement income planning.
