Servicers on the Hook as 4.1 Million Loans Now in Forbearance May 8 2020

BY: JANN SWANSON

Black Knight reports that, as of May 7, there were 4.1 million loans in forbearance, up from 3.8 million in the company’s last report which covered plans put into effect by mortgage servicers through April 30. The new total represents 7.3 percent of all active mortgages and accounts for $890 billion of unpaid mortgage principal.

Fannie Mae and Freddie Mac guaranteed loans account for 1.91 million of total loans and $390 billion in principal. Those loans are 6.4 percent of the 27.9 million loans the GSEs have in service. 

There were 1.33 million Ginnie Mae (FHA and VA) loans in forbearance plans, accounting for an unpaid balance of $246 billion and 11.0 percent of the Ginnie Mae portfolio of 12.1 million loans. The remaining 933,000 loans are 7.2 percent of the 12.9 million loans being serviced for portfolio or private label lenders. The unpaid balance is $253 billion.

Even when homeowners are not making their full mortgage payments, servicers are required to advance principal and interest (P&I) payments to the investors in securities backed by those loans as well as making property tax and homeowners insurance premium payments for loans with escrow accounts. Black Knight estimates that the current level of forbearance will require monthly  advances of $5 billion for P&I and $1.8 billion for taxes and insurance. 

The GSEs have capped the advance payment requirement for its servicers at four months. At the current level of forbearance that would still be $8 billion in advances. Tax and insurance payments are not capped. The Ginnie Mae loan advances are currently estimated at $1.2 billion monthly for  P&I and $0.5 billion for T&I. Ginnie Mae has not capped these payments but has arranged for a pass-through facility to ease the burden. Another $2.1 billion in lost funds will be required for the portfolio-held or private label mortgages.

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