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The latest Black Knight Mortgage Monitor covers the Surge in Forbearance Volumes.

Key Points

  • More than 3.8M mortgage holders – 7.3% of the total first lien market – have already entered into forbearance plans as of April 30. 
  • FHA/VA loans have the highest forbearance rates by investor class at 10.5% (1.27M), while the 1.7M (6.1%) GSE mortgages in forbearance represent the largest volume.
  • Despite not being mandated by the CARES act, some 6.7% (863K) of portfolio held and/or private labeled security loans are also under forbearance » The $841B in UPB currently under forbearance is significantly impacting servicer cash flows.  
  • Roughly $1.1B/month in P&I advances are needed for FHA/VA loans in forbearance,  plus another $480M in monthly taxes and insurance (T&I) payments hang in the balance as well

Surge Tapers Off

Daily Change in Active Forbearance 2020-05-04
  • After surging at the beginning of April and then rising again near the 15th – when late fees  are typically charged on past due payments – the number of new forbearance requests has declined in recent weeks.
  • While total forbearance volumes continue to mount, daily inflow has begun to taper off.
  • Between 53,000 and 102,000 new plans have been put into place over each of the last nine days, less than a quarter of levels seen earlier in April.

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Active Forbearance Plans Scenarios 

Active Forbearance Plans Scenarios 2020-05-04

Three Scenarios

  1. In an optimistic scenario in which daily forbearance volumes continue to decline by 10% per  day, the number of forbearances could peak at approximately 4.5M in the coming months. 
  2. Should current forbearance volumes hold steady through mid-June, more than 8M  homeowners could enter into forbearance plans, representing 16% or more of all mortgages.
  3. If that adverse scenario holds true, servicers would be required to advance $4 billion in monthly principal and interest payments on GSE mortgages alone 

Even under the FHFA’s recent four-month limit on principal and interest (P&I advances), servicers would still be bound to make $16 billion in advance payments over that time span

The middle scenario seems about right but the totals from now through mid-May will tell the story. 

Mish