15
Journal
RMBS MODIFICATIONS
AND REPAYMENTS
INCREASE POST-
FORBEARANCE
As pandemic forbearance plans continue
to expire, borrowers are continuing to choose
loan modifications and other repayment
options going forward.
According to Fitch Ratings' Q4 2021
Residential Mortgage-Backed Servicer Metric
Report, servicers reported a decline in loan
modifications from 40% during Q3 2021, to
24% in Q4. Repayment options, including
cures, increased however, from 11% in Q3 to
26% in Q4.
Nonbank servicers reported loan
modification volume increased slightly from
18% to 20% workout volume quarter over
quarter, while repayment options, including
cures, rose only slightly to 7% from 6%.
Fitch said this may indicate that nonbank
borrowers may not opt for full reinstatement,
preferring instead to apply for alternative loan
workout options, if the borrower qualifies.
"Concurrent with the increase in post-
forbearance payment and loan workout
activity, delinquency rates have seen a modest
increase for nonbank servicers in the fourth
quarter," the report said. "Nonbank servicers
reported an increase in the 60-plus day
delinquency category to 5% from 2% from
the third quarter. Other delinquency metrics
remained constant over the third and fourth
quarters, with the exception of a decline in
90-plus-day past due accounts to 7% from 8%
as reported by bank servicers."
Servicers also reported that they have
increased staffing levels due to escalating post-
forbearance activity, and the use of temporary
and contract employees has declined by 20%
year over year. While factors such as loan
portfolio size, technology sophistication and
forecasting tools, among others, can influence
these metrics; however, it is apparent that
bank servicers have relied more heavily
on temporary and contract employees and
upstaffing to handle pandemic-related
business volume.
"Loan modifications and other repayment
options saw a significant increase as borrowers
exited forbearance plans in the fourth quarter,"
Fitch Ratings Director Richard Koch said.
"Bank and nonbank servicers are showing that
post-forbearance workout activity consists of
loan modifications and repayment options,
including cures, while delinquencies remain low."
