Mortgages in forbearance well off the peaks but uncertainty beckons

The number of US home loans in forbearance plans declined for the fourth week in succession and is now more than 22% lower than the peak seen in late May, according to data released by Black Knight today (18 September).

As of September 15, 3.7m loans, representing $7.81bn in unpaid principal, are in Covid 19 forbearances plans compared to 4.7m by May 26.

However, for a large number of plans (1.7m), September is the last month covered by forbearance, so the next few weeks could see significant extension activity coupled also with loans dropping out of forbearance. It is difficult to forecast which will be uppermost.

The decline in forbearances was primarilyunderpinned by GSE loans, with active forbearance plans dropping by 28,000, while Federal Housing Authority (FHA) and Veterans Association (VA) loans experienced just a 3,000 weekly decline.

Forbearance plans among GSE loans have now fallen by 32% from their peak in late May, reducing the number of GSE loans in forbearance below FHA/VA volumes for the first time since the Covid 19 lockdown began.

Overall, 1.361m GSE mortgages are in forbearance, while 1.365m FHA/VA loans are in forbearance.

The number of FHA/VA loans in forbearance has dropped by only 11% from the late May highs.

Simon Boughey