Forbearance is not scary; it is not a joke either. Forbearance is helpful when it is managed properly. According to the Mortgage Bankers Association (MBA)’s data on September 6, 2020, 25% of the total homeowners in forbearance plans are still paying their monthly mortgages. In other words, out of 3.4 million homeowners under forbearance, there are 820,000 who have not missed a payment.
What does strategic forbearance mean? They are currently on forbearance but they are still paying?
Bloomberg author Christopher Maloney, a market strategist and former portfolio manager suggests that a strategic forbearance is when many homeowners use forbearance as a backup option, just in case.
One of the most surprising aspects of this entire episode, according to Mike Fratantoni, MBA’s SVP and Chief Economist. He also added that he had seen the rate drop over the months as borrowers on strategic forbearance exit out of the forbearance plan.
Ginnie Mae borrowers in forbearance:
- Current: 23.7%
- Conventional borrowers: 20.6%
- On banks’ balance sheets: 28.6%
Maloney further added, “This is important, as mortgages which continue to pay are not going to be bought out by servicers, and for mortgage investors buyouts are just prepayments by another name. With loans bought out from pools at par, this can weigh on portfolio performance, especially when much of the mortgage universe is trading at a premium.”
Recently, it was noted that there was a significant drop in forbearance rates, however it may have just been as a result of servicers moving loans from one category to another.
From 11.83% down to 9.16% !
Ginnie Mae’s percentage in the forbearance universe has dropped to its current 9.16% from a high of 11.83% on June 21. This is definitely good news! However, the drop was only boosted by bank servicers buying out loans. This moved some forbearance loans to the ‘other’ category—which has increased over that time frame—from the ‘Ginnie Mae’ category. Homeowners are still facing uncertainty as they get closer to the end of their forbearance plans. If you, or anyone you know may be under this situation, do get in touch with Analytics Before Foreclosure. Get help in analyzing your situation to come up with options for you and your family. Free discovery call is available at 866-857-5405.
