Mortgage Application Volume Continues Decline

The volume of
mortgage applications for both home purchase and refinancing fell for the third
straight time during the week ended February 19.
The Mortgage Bankers
Association (MBA) says its Market Composite Index, a measure of that volume,
dropped 11.4 percent on a seasonally adjusted basis. It was the largest single
week decline since the week ended April 3, 2020. On an unadjusted basis the index
was down 10.0 percent.

The Refinancing
Index decreased 11 percent from the previous week but was still 50 percent
higher than the same week one year ago. The refinance share of mortgage
activity decreased to 68.5 percent of total applications from 69.3 percent the
previous week.

The seasonally
adjusted Purchase Index dropped 12 percent and was 8 percent lower before adjustment.
Activity was 7 percent higher than the same week one year ago.


Refi Index vs 30yr Fixed


Purchase Index vs 30yr Fixed


rates have increased in six of the last eight weeks, with the benchmark 30-year
fixed rate last week climbing above 3 percent to its highest level since
September 2020. As a result of these higher rates, overall refinance activity
fell 11 percent to its lowest level since December 2020
, but remained 50
percent higher than a year ago,” said Joel Kan, MBA’s Associate Vice President
of Economic and Industry Forecasting. “Additionally, the severe winter weather
in Texas affected many households and lenders, causing more than a 40 percent
drop in both purchase and refinance applications in the state last week.” 

Kan, “The housing market in most of the country remains strong, with activity
last week 7 percent higher than a year ago. The average loan size of purchase
applications increased to a record $418,000, in line with the accelerating
home-price growth caused by very low inventory levels.” 

FHA share of total applications jumped to 11.2 percent from 9.0 percent the previous
week while the VA share fell to 11.9 percent from 13.2 percent and the USDA
share dipped 0.1 point to 0.3. The balance of all loans was $344,800, up from
$338,200 and for purchase loans the balance grew from $412,200 to $418,000.

The average
contract interest rate for 30-year fixed-rate mortgages (FRM) with balances at
or below the current conforming limit of $548,250 increased to 3.08 percent
from 2.98 percent, with points increasing to 0.46 from  0.43. The effective rate was 3.22 percent. 

rate for jumbo 30-year fixed-rate mortgages, loans with balances greater than the
conforming limit, increased to 3.23 percent from 3.11 percent, with points increasing to 0.43 from
0.35. The effective rate was 3.35 percent.

FRM backed by the FHA had an average rate of 3.00 percent with 0.33 point. The
prior week the rate was 2.93 percent with 0.27 point. The effective rate
increased to 3.10 percent.  The rate for
15-year fixed-rate mortgages increased 9 basis points to 2.56 percent and
points grew to 0.40 from 0.36. The effective rate was 2.66 percent.

average contract interest rate for 5/1 adjustable-rate mortgages (ARMs) was unchanged
at 2.83 percent, with points
decreasing to 0.36 from 0.70. The effective rate declined to 3.10 percent.  The ARM share of applications increased from
2.4 to 2.7 percent.  

MBA’s Weekly Mortgage Applications
Survey has been conducted since 1990 and covers over 75 percent of all U.S.
retail residential applications Respondents include mortgage bankers,
commercial banks, and thrifts. Base period and value for all indexes is March
16, 1990=100 and interest rate information is based on loans with an 80 percent
loan-to-value ratio and points that include the origination fee.

MBA’s latest Forbearance and Call Volume Survey found a 7-basis point
decline in the total number of loans in forbearance t
o 5.22 percent of all
first liens as of February 14, 2021. According to MBA’s estimate, 2.6 million homeowners
are in forbearance plans.  Of those
loans, 15.9 percent are in the initial forbearance plan stage, while 81.6
percent are in a forbearance extension. The remaining 2.5 percent are re-entries
in the program. 

share of Fannie Mae and Freddie Mac (GSE) loans in forbearance decreased to
2.97 percent –
a 4-basis-point improvement. Ginnie Mae (FHA and VA) loans in forbearance ticked
down 2 basis points to 7.32 percent, while the forbearance share for portfolio
loans and private-label securities (PLS) decreased by 20 basis points to 8.94
percent. The percentage of loans in forbearance serviced by independent
mortgage banks (IMB) fell 15 basis points to 5.54 percent, and the percentage
of forborne loans in depository servicers’ portfolios rose 2 basis points to
5.28 percent.

“The share of loans in forbearance has declined for
three weeks in a row, with portfolio and PLS loans decreasing the most this
week. This decline was due to a sharp increase in borrower exits, particularly
for IMB servicers,” said
Mike Fratantoni, MBA’s Senior Vice President and Chief Economist. “Requests for new
forbearances dropped to 6 basis points, matching a survey low.” 

Fratantoni added, “The housing market is
quite strong, with home sales, home construction, and home price data all
testifying to this strength. Policymakers and the mortgage industry have helped
enable this during the pandemic by providing millions of homeowners support in
the form of forbearance. The decision to extend the allowable duration of
forbearance plans should provide for a smoother transition this year as the job
market continues to recover.”

MBA’s latest Forbearance and Call
Volume Survey covers the period from February 8 through February 14, 2021 and
represents 74 percent of the first-mortgage servicing market (37.1 million


Borrowers With Fannie Mae, Freddie Mac Mortgages Can Get Additional Forbearance, Regulator Says

The Federal Housing Finance Agency is extending the length of time that borrowers can be in a COVID-related forbearance on mortgages back by Fannie Mae and Freddie Mac.

Originally, Fannie Mae and Freddie Mac instructed loan servicers that mortgage borrowers could request up to 12 months of forbearance on their mortgages as a result of the coronavirus pandemic.

Now, the FHFA is allowing these borrowers to request a forbearance extension of up to three months, the agency announced Tuesday.

While in forbearance, mortgage borrowers are not required to make their monthly mortgage payments. When forbearance ends, these borrowers have a range of options to choose from to pay back the owed amount, including tacking the missed payments onto the end of the mortgage’s duration.

Homeowners must already be in forbearance on their mortgage by Feb. 28 to qualify for the three-month extension.

Separately, the FHFA is extending the moratorium on single-family foreclosures and evictions for properties with mortgages backed by Fannie and Freddie by one month until March 31. FHFA Director Mark Calabria said the steps were being taken “to keep families in their home during the pandemic.”

The FHFA expects that Fannie and Freddie will bear between $1.5 billion and $2 billion in expenses as a result of the COVID-19 foreclosure moratorium.

As of Jan. 31, 3.07% of Fannie Mae and Freddie Mac loans are in forbearance, according to recently-released data from the Mortgage Bankers Association. That’s better than the overall forbearance rate for all mortgages nationwide, which stands at 5.35%.

The number of loans in forbearance decreased at the end of January, the Mortgage Bankers Association reported. “While new forbearance requests increased slightly at the end of January, the rate of exits picked up somewhat but remained much lower than in recent months,” said Mike Fratantoni, chief economist at the Mortgage Bankers Association.

Fratantoni had expected the rate of exits from forbearance to pick up in March and April as people came up against the original 12-month deadline to resume making payments. He warned that, given the employment situation nationwide, homeowners who are unemployed and still in forbearance would “need additional support until the job market recovers to a greater extent.”


Expirations Drive First Decline in Forbearances in Three Weeks

Black Knight says the number of loans in
forbearance saw a significant decline over the past week, driven, as the
company had said to expect, by plans expiring at the end of January. There was
a net decrease of 45,000 active plans (-1.6 percent), the first improvement in
three weeks. There are still 47,000 plans which were scheduled to expire on
January 31 which are currently being reviewed by servicers for an extension or
removal. This may mean additional modest declines over the next few days.

The greatest improvement was to the FHA
and VA loan numbers. Those combined portfolios shrunk by 2 percent or 23,000
loans. Twelve thousand loans in the  Fannie
Mae and Freddie Mac (GSE) portfolios left forbearance, a -1.3 percent change. The
total forbearances serviced for bank portfolios and private label securities (PLS)
dropped by 10,000 or 1.4 percent.

Black Knight said that, despite the
strong weekly numbers, overall improvement continues to be limited.
The total
number of loans in active forbearance is down just 42,000 or 1.5 percent from
last month.  As of February 2, 2.72 million homeowners or 5.1 percent of
the nation’s 53 million mortgages remain in active COVID-19 related forbearance
plans. This breaks down to 913,000 GSE loans (3.3 percent of those portfolios),
1.126 million FHA/VA loans (9.3 percent) and 680,000 portfolio/PLS loans (5.2
percent). These loans have an aggregate principal balance of $541 billion.

While this is the smallest number of
forbearances since late April, the company points out that volumes have been
essentially stuck in the 2.72  to 2.81
million range since early November. “As we move toward the middle of February,
keep in mind the trend of mid-and late month increases in active forbearance
plans,” Black Knight says. “Looking ahead, some 390K plans are set to expire at
the end of this month. This represents perhaps the last opportunity for
moderate improvement in forbearance volumes before the first wave of plans
reach their currently scheduled 12-month expirations at the end of March.”


What You Need to Know Before Exiting Mortgage Forbearance

Millions of people are struggling with their mortgage payments. It’s true that the total number of loans in forbearance did decrease in December to 5.48%, but that doesn’t mean that people are out of the woods yet. According to the MBA, there are 2.7 million people in active forbearance, who will soon reach their six-month mark and either apply for their one-time extension or resume their payments. 

Unfortunately, just because you run through your forbearance period doesn’t mean you’re financially ready to go back to paying your mortgage in full. Thankfully, you still have options. The FHA has provided a two-month extension of the eviction and eviction moratorium for single-family borrowers. Here’s what you need to know about mortgage forbearance during the pandemic. 

Forbearance under the CARES act

If you’re having a hard time paying your mortgage, the CARES act allowed homeowners to apply for a six-month forbearance period and an additional one-time six-month extension. That relief has been extended through February 28. To apply, you do not have to prove the pandemic has financially impacted you. Many private lenders are also offering forbearance, though terms may be different. 

Federally-backed mortgages include:

  • U.S. Department of Agriculture (USDA)
  • Department of Veteran Affairs (VA loans) 
  • Fannie Mae and Freddie Mac 

[ Read: What is Mortgage Forbearance?

Keep in mind that forbearance isn’t mortgage forgiveness. You will pay that money back in the end. Before you even enter forbearance, you should know the expectations and requirements of your servicer when the period ends. 

Common options for repayment after forbearance ends:

  • A lump-sum payment when you exit forbearance
  • A repayment plan that will spread the amount owed over a specified number of months Which will mean an increased monthly payment during that time
  • Your servicer offers the option of modifying your loan through a defined modification program
  • An extension of your loan term to account for the amount of time it will take to pay back the missed payments 

How does it impact your credit?

Missing your payments and being delinquent on your mortgage can be detrimental to your credit. A provision of the CARES act is that your forbearance period will not negatively impact your credit score. 

Ordinarily, your forbearance would be reported to creditors. Until the relief ends, your account will be reported the same from the start of your forbearance period until the end. So if you were current on your payments before, you’ll still be considered current. The same goes for delinquent accounts. That said, your forbearance is reported, so future lenders will see it.

[ Read: Why Have Credit Scores Increase During the Pandemic? ]

Mistakes do happen, even on credit reports. During your forbearance period, make sure you carefully read through your credit reports; that way you catch any errors. The same goes for your loan statements. Just because you are not actively paying doesn’t mean you should disregard your billing statements. 

In this article

Forbearance isn’t always the solution to the problem

Even with the help of forbearance, it doesn’t mean everyone is ready to resume payments. 54% of households say they are not confident they are able to restart their payments. Additional support is needed post forbearance. 

According to the Urban Institute, 85% of people who are delinquent on their mortgage payments are working with services to mitigate the losses — while 15% are not working with the options available. Researchers suggest that a considerable portion of the people who are delinquent on their mortgage and not doing anything about it is because they might not know about the options available to them. Navigating the ins and outs of the forbearance process can be difficult.

What to do if you exit forbearance but still need help

Talk to your lender

If you still need help past your forbearance period, talk to your lender. “Credit unions in particular, as nonprofit member-owned financial institutions, are more likely to work with their members to try to help them out,” says CUNA Senior Economist Jordan van Rijn.

“This may including flexible installment plans, refinancing, or restructuring the loan. In most cases that we are aware of, the skipped payments are simply added to the end of the mortgage such that the borrower doesn’t have to pay the entire amount that was missed while he/she did not make payments,” van Rijn adds. 

Consider refinancing 

If you have a relatively strong credit score, you may consider refinancing your mortgage, which would earn you a lower monthly payment and a shorter loan term. That said, the closing costs for this option can be high –– often ranging from 2% to 5% of your loan. 

[ Read: Mortgages in Forbearance Will be Eligible for Refinance

Generally, it’s best to only refinance if you plan to stay in your home for at least five years and would save 0.5%, van Rijn advises. Given the upfront costs, this option is ruled out for many people during the pandemic. 

“Housing prices have increased at a dramatic pace during the pandemic with the Case-Shiller National Home Price Index reaching record levels. Over the past year through October 2020, the index increased an incredible 8.4%, the fastest since 2014. This, in turn, has led to increased equity in people’s homes, allowing for more mortgage refinancing,” says van Rijn


When my forbearance period ends, will I have to pay it all back at once?

How you repay the back payments on your mortgage will be determined by your lender. Common methods include adjusted repayment schedules, a loan extension to account for that time, or a lump sum payment. 

Will applying for forbearance hurt my credit score?

Normally, your forbearance would be reported to creditors. However, in response to the pandemic, a provision of the CARES act states that your forbearance period will not negatively impact your credit score. 

Will I pay more in interest if I get forbearance?

No. Your interest rate will remain the same during your forbearance period, though it will still be occurring. If you do not pay by the time your forbearance ends, it will be added to your balance. 

Can I apply for forbearance for my rental property?

You can apply for forbearance for a rental property if the mortgage is federally-backed. Talk to your lender to find out the terms of repayment for your forbearance period. 

Expert Cited

Jordan van Rijn is Senior Economist for the Credit Union National Association (CUNA) and Associate Lecturer at the University of Wisconsin-Madison’s Department of Agricultural and Applied Economics. He has 10 years of experience in international development, micro finance, and economic research in Latin America, Africa, Southeast Asia and the United States. Jordan conducts statistical and economic analysis to support CUNA’s advocacy efforts.

We welcome your feedback on this article. Contact us at with comments or questions.

Image credit: Gaudi Lab / Getty Images


Mortgage forbearance rate continues to drop

The U.S. forbearance rate fell nine basis points last week to 5.37% of servicers’ portfolio volume, according to a survey from the Mortgage Bankers Association on Monday.

Though every investor class did manage to see a decline in rates, Fannie Mae and Freddie Mac once again claimed the smallest forbearance rate at 3.13%.

Ginnie Mae loans in forbearance, which include loans backed by the Federal Housing Administration, have fluctuated greatly in the past several months but saw the greatest fall in portfolio share last week – down 18 basis points to 7.85%. Despite a nine basis point drop, portfolio loans and private-label securities (PLS) still boast the largest share with 8.68% share in forbearance.

Although marginal declines are taking place, the rate of exits remains much lower than what was seen in October and early November, noted Mike Fratantoni, MBA’s senior vice president and chief economist.

And borrowers are continuing to push out payments. Over 80% of total loans in forbearance are in some form of extension, up from 79% the week prior, and re-entries are also increasing.

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“Job market data continue to indicate weakness, and that means many homeowners who remain unemployed will need ongoing relief in the form of forbearance,” Fratantoni said. “While new forbearance requests remain relatively low, the availability of relief remains a necessary support for many homeowners.”

The MBA still shows data that homeowners who remain in forbearance are more likely to be in distress, with fewer continuing to make any payments.

Starting Nov. 2, the MBA began reporting the number of borrowers who continued to make their monthly payments during their forbearance period and have since exited. Since that date, the MBA has revealed that the number of up-to-date borrowers has consistently dropped.

Now, of the cumulative forbearance exits for the period from June 1, 2020 through Jan. 10, 2021, 28.8% represented borrowers who continued to pay – down from 29.1% the week prior.

During that same time period, those who exited without a loss mitigation plan in place inched up to 13.5% from 13.3% the week prior.