Mortgage Forbearance Rate Drops for Sixth Straight Week, Hits Lowest Level in a Year

by Maurie Backman | Updated July 19, 2021 - First published on April 16, 2021

Many or all of the products here are from our partners that pay us a commission. It’s how we make money. But our editorial integrity ensures our experts’ opinions aren’t influenced by compensation. Terms may apply to offers listed on this page.
A couple with a young daughter holds up a cardboard roof.

Image source: Getty Images

More homes are exiting forbearance. But what exactly does that mean?

When the coronavirus pandemic first hit, the economy was quick to shed millions of jobs. Americans dealing with income loss were unable to keep up with their bills. This included homeowners, many of whom instantly struggled to pay their mortgages.

Thankfully, the CARES Act was signed into law in late March of 2020, and it included a provision allowing homeowners experiencing any financial hardship to put their loans into mortgage forbearance. Normally, forbearance requests can be denied, but under the CARES Act, that wasn't allowed.

Initially, mortgages in forbearance were allowed to be paused for up to 12 months, but that timeline has since been extended to 18 months. But these days, there are fewer loans that remain in forbearance, and that could be a sign that the economy is taking a turn for the better.

Forbearance levels are down

For the week ending April 4, the share of home loans in forbearance decreased for the sixth week in a row. Forbearance exits rose to their fastest pace since early November. That means there are currently only about 2.3 million homeowners with forbearance plans in place. That represents the lowest forbearance rate over the past year.

What's interesting about these forbearance plan exits is that forbearance was extended to last up to 18 months for homeowners in need. People who put their loans into forbearance at the very start of the pandemic won't reach that 18-month mark until the fall. Therefore, the fact that so many homeowners have exited forbearance means they did so voluntarily. And if they opted to not extend their forbearance programs, it means they're in a strong enough position to cover their mortgage costs once again.

Of course, we can't gloss over the fact that more than 2 million homeowners are still in forbearance and that more loans might enter forbearance in the coming weeks. We're still not out of the woods with regard to the pandemic or the greater economic crisis it's spurred.

Hundreds of thousands of workers are still filing new jobless claims every week. In fact, some financial experts fear that a wave of foreclosures could ensue once forbearance plans come to an end following their 18-month streak. This has led the Consumer Financial Protection Bureau (CFPB) to try and establish a rule that will prohibit foreclosures for the remainder of 2021.

But despite these concerns, there's reason to be hopeful. A lot of homeowners seem to be in a stronger place financially now than they were at the start of the pandemic, as evidenced by the fact that they opted to exit forbearance. Though the U.S. jobless rate is still much higher than it was before the pandemic began, it's been steadily decreasing since peaking in April of 2020. If things continue on this slow but steady downward trajectory, we could be looking at a much-improved economy by the time 2021 is over.

The Ascent's Best Mortgage Lender of 2022

Mortgage rates are on the rise — and fast. But they’re still relatively low by historical standards. So, if you want to take advantage of rates before they climb too high, you’ll want to find a lender who can help you secure the best rate possible.

That is where Better Mortgage comes in.

You can get pre-approved in as little as 3 minutes, with no hard credit check, and lock your rate at any time. Another plus? They don’t charge origination or lender fees (which can be as high as 2% of the loan amount for some lenders).

Read our free review

About the Author