The number of residential mortgages in active forbearance plans has dipped below 3 million and now makes up 5.6% of all active mortgages, according to the mortgage-tracking company Black Knight (NYSE:BKI).
That's the lowest active deferrals have been since early April. In late June, total forbearance plans reached 4.68 million, or roughly 8.8% of all active mortgages. Active forbearance plans dropped by 649,000 from the previous week, representing an 18% decline.
Private label securities (PLS) and portfolio loans saw the largest weekly drop, with a reduction of 228,000. Loans guaranteed by government-sponsored entities, such as Fannie Mae and Freddie Mac, as well as Federal Housing Administration and Veteran Affairs loans are seeing strong declines in forbearances as well.
The sharp drop comes as CNBC reports that many forbearance plans hit the end of their six-month plans .
When the coronavirus pandemic struck in March and then essentially closed the economy in many states later that month, many lenders agreed to allow borrowers to put off paying their monthly payments.Some plans lasted for one month, while others lasted for three months, and many borrowers were able to renew their forbearance plans, which is why many have lasted six months.
According to Black Knight, another 800,000 forbearance plans will expire within the next month, so the number of mortgages in forbearance could keep coming down.The news should bode well for lenders that were holding the loans because they can now offer investors better insight on the credit quality of this group of borrowers.
It should also be good news for mortgage servicers that were still on the hook for the delayed mortgage payments to the investors who may have owned the loans in some kind of mortgage-backed security.