Homeowners who sought mortgage forbearance during the pandemic are exiting those plans in larger numbers as the economy recovers and lenders provide other options for still-struggling borrowers.
The share of mortgages in forbearance hit 4.50% for the week ending April 11, down from 4.66%, the previous week, according to the Mortgage Bankers Association. That marked the seventh straight week of declines and followed one of the largest decreases on record in the prior week. About 2.3 million homeowners remain in forbearance plans, according to the MBA.
The declines reflect a robust housing market and improving job market — 916,000 jobs were added back to payrolls in March, according to the latest government data. New government support has also buoyed vulnerable households.
"Combined with the homeowner assistance and stimulus payments that many households are receiving, we expect that the forbearance numbers will continue to decline in the months ahead as more individuals regain employment," Mike Fratantoni, MBA’s chief economist, said in a statement.
Still, lenders need to offer help, even to those leaving forbearance as they get back on their feet.
"Borrowers are entering a deferral plan or mortgage modification," Fratantoni told Yahoo Money. "Maybe they're back at their job and can return to the original payment, but can't pay off the forbearance amounts. A deferral allows them to take those payments to the end of the loan."
In March, 31% of those borrowers exiting forbearance plans took deferrals, according to Fratantoni. Others are entering mortgage modifications —22% of those coming out of forbearance plans accepted a mortgage modification last month.
"If you have a borrower who has had hours cut back at work, but expect it to be temporary, they may be a good candidate for modification," Fratantoni said. "We’re seeing it more and more. It lowers payment for a period of time, then jumps back to the original payment at some point down the road."
Homeowners who remain in forbearance for more than 12 months "are more likely to need a modification coming out," Fratantoni said.
More than two-thirds of borrowers in forbearance extensions have exceeded the 12-month mark.
The percentage of mortgages in forbearance has dropped significantly since reaching a pandemic high of over 8% in June of last year. After government assistance poured in, that share declined through November, where it leveled off until the end of February.