More Americans are exiting pandemic-related forbearance plans as the July 31 deadline for a nationwide foreclosure moratorium is set to expire.
The number of homeowners in forbearance plans dropped by 189,000 for the week ending July 6. About 1.86 million—or 3.5% of all active mortgages—are in forbearance. This marks the first time the total has dropped below 2 million since April 2020, analyst company Black Knight reports.
Of 325,000 plans that Black Knight reviewed, two-thirds had exited the program, the highest removal rate since the first entrants reached their 12-month mark of forbearance.
The Mortgage Bankers Association, in a separate report, also reported coronavirus-related forbearances falling. “Strong job growth in June should provide a springboard for further improvements in the forbearance numbers over the next month,” says Mike Fratantoni, senior vice president and chief economist at the MBA. “The rate of forbearance exits and new forbearance requests remained at low levels, but we expect the pace of exits to increase.”
Of those who exited forbearance between June 1, 2020, to July 4, 2021, nearly 28% resulted in a loan deferral or a partial claim. About 24% were from borrowers who had continued to make their monthly payments even during their forbearance period. Nearly 16% exited forbearance without a loss mitigation plan in place yet. About 14% had reinstatements, in which past-due amounts are paid back as soon as you exit forbearance. Others had loan modifications and about 8% had loans that were paid off through either a refinance or by selling a home.
“Borrowers who are exiting forbearance now are likely to have been in relief for over a year, with almost 60% of borrowers in forbearance extensions of longer than 12 months,” Fratantoni says. “These borrowers may face more challenges getting back to making regular payments.”
Still, industry analysts have predicted minimal impact from delinquent homeowners whose pandemic-related mortgage forbearance programs are ending. Read more: Foreclosure Spike Unlikely as Owners Exit Forbearance