Despite a jump in the government loan sector, the overall weekly forbearance rate fell 4 basis points, returning it to a level not seen since the start of the pandemic, according to the Mortgage Bankers Association.

At 2.96%, the overall payment suspension rate was down from 3% a week earlier and back in line with March 2020 levels, but the equivalent for loans packaged into Ginnie Mae securities was up by 3 basis points at 3.42%, suggesting a concentration of distress amid broader declines. Just over half of all borrowers exited forbearance plans as current, or were able to resume normal payments and defer missed ones until the end of their loans. A little over 16% of exits were noncurrent loans with no loss mitigation in place, and another 11.76% were modifications. Most of the other exits involved loans that were reinstated or paid off.

With CARES Act-related forbearance expiring and restrictions on foreclosures continuing through year-end, mortgage companies are preparing for exits that will call for different types of operational allocations than the during the last business cycle of this type, said Nate Johnson, executive vice president, mortgage banking at SLK Global Solutions, in an interview.

“Homeowners have much more equity now and there will not be a lot of people walking from their properties. So when it comes to all the recovery solutions people were using 10-12 years ago, they’ve got to change the mix,” he said. “The near-term spend on servicing is going to be much lower for foreclosure functions than it is for loan modification work because borrowers want to stay in their home.”

In addition to government insured or guaranteed loans, the types of mortgages servicers may have to allocate relatively more resources to are those in bank portfolios or private-label securities. While the forbearance rate for portfolio and PLS loans fell to 4 basis points to 6.91% from 6.95% in the most recent week, it’s still relatively high, in part because the category includes many distressed loans that have been bought out of Ginnie Mae pools. In comparison, loans purchased by government-sponsored enterprises Fannie Mae and Freddie Mac had a 1.44% forbearance rate that was down 3 basis points from a week earlier.

The MBA’s numbers reflect the Sept. 13-19 period and a sample of 25 independent mortgage companies, 21 banks and two subservicers representing 74% of the first-lien home loan market.

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