What do the changes in abstention rates mean?

The loans have escaped forbearance, according to the most recent Forbearance and call volume survey, which showed that the total number of loans currently on hold fell from 5.54% of service provider portfolio volume the previous week to 5.48% as of December 6.

A total of 2.7 million homeowners are on the forbearance plan, according to MBA’s estimate.

Meanwhile, Fannie Mae and Freddie Mac Loans‘ share of abstention has fallen off its mark, falling to 3.26%, an increase of 8 basis points. As for Ginnie Mae? Forborne loans plunged 21 basis points to 7.68%, while there was a 19 basis point increase to 8.89% in the forbearance share for portfolio loans and equity securities. private label. Among independent mortgage banking, there was a drop of 4 basis points from the previous week to 5.98%. The loan forbearance percentage for depository services declined 10 basis points from the previous week to 5.38%.

“The share of forbearance loans declined in the first week of December. However, more borrowers requested relief, with new forbearance requests reaching their highest level since the week ending August 2, and service call volume reaching its highest level since the week ending April 19, ”said Mike Fratantoni, senior vice president and chief economist of the MBA.“ Compared to the past two months, more and more of owners coming out of forbearance use a modification, a sign that they have not been able to fully get back on their feet, even if they are working again. “

Fratantoni added: “The latest economic data shows a slowdown, particularly an increase in layoffs and long-term unemployment. Coupled with the latest increase in COVID-19 cases, it’s not surprising to see more homeowners looking for a relief. “

By stages, 18.72% of the total forbearance loans are at the initial stage of the forbearance plan; 78.72% are subject to an extended abstention.

The abstention data may not be as intimidating as it seems at first glance. That is to say, according to an article by Bloomberg.com, which indicates that MBA data shows that as of September 6, up to 25% of all homeowners with forbearance plans continued to make their monthly mortgage payments. This means that of the 3.4 million households subject to forbearance at that time, about 820,000 had not missed any payments.

In an interview with Bloomberg, Fratantoni called this “one of the most surprising aspects of this whole episode.”

He added that he had seen this share drop over the months as borrowers came out of forbearance.

What does this indicate? Bloomberg Author Christopher Maloney (a market strategist and former portfolio manager) suggests that this is “strategic forbearance, with many owners taking the option, just in case.”

He broke it down: “Of Ginnie Mae’s borrowers in forbearance, 23.7% is current. For conventional borrowers, it’s 20.6%, and for those who sit on bank balance sheets, it’s 28.6%, ”Maloney pointed out. “This is important, because mortgages that continue to pay will not be redeemed by the services, and for mortgage investors, redemptions are just prepayments under another name. while much of the mortgage universe is trading at a premium. “

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