Serious delinquencies decline as borrowers find post-forbearance options


Drop of growth before group of borrowers with long-term delinquencies resulted in a drop in total arrears during the third quarter, as many found post-forbearance alternatives, data from the Mortgage Bankers Association suggests.

The overall seasonally adjusted default rate fell 58 basis points from the second quarter to 4.88%, and declined more sharply than a year ago. This likely points to the fact that many people who leave forbearance with payment difficulties try to resolve them either by adding the missed payments at the end of their loan term or by asking for changes more in line with their loan terms. current finances, according to the trade group. last report. Compared to the same quarter last year, when the pandemic was more of a concern, the seasonally adjusted delinquency rate fell almost 3% or 277 basis points.

The national investigation is asking mortgage companies to report loans in arrears if payment has not been made according to the original loan terms, but the group said it did not expect the results. of the recent survey include mortgages in the process of being postponed or amended. included in this category.

“The improvement [in arrears] was entirely due to a drop in late-delinquent loans – those loans that are 90 days old [or more] past due, but not in foreclosure, ”said Marina Walsh, vice president of industry analysis at MBA, in a press release. “At the end of the third quarter, many borrowers were approaching the 18-month expiration point of their forbearance terms and were placed in permanent retention solutions, such as loan modifications and deferrals.”

The sign that many distressed borrowers appear to be successfully transitioning to alternatives that help resolve defaults and avoid foreclosures gives hope that many mortgage companies will resist the wave of tighter service enforcement emanating from it. regulators.

On November 10, a group of regulators warned that the wiggle room they had given mortgage agents over complying with the CARES Act’s service rules to allow for operational adjustments last year. officially ended.

However, one of these regulators, the Consumer Financial Protection Bureau, reported a wide range of delinquency rates when it published a study on 16 major service metrics earlier this year.

The association on November 8 ended its weekly monitoring of loans with forbidden payments because their number almost fell below 1 million, which is less than a quarter of the number observed and the peak of the pandemic. The group will continue to publish a monthly report on the results of borrowers after the plan exits and other performance measures, in addition to its regular quarterly delinquency survey.

Almost 43% of forbearance exits were modifications and over 23% were deferrals in the most recent week followed by the MBA, which ended on October 31. Only 16% of loans remained in arrears. Cumulatively since June 1, 2020, more than 29% of borrowers have suffered deferrals, more than 20% have continued to pay despite forbearance plans, nearly 17% have remained in arrears and have left without an alternative plan in place and 13.4% committed or requested changes.

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