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M R EP O RT | 43 SERVICING THE LATEST O R I G I NAT I O N S E R V I C I N G DATA G O V E R N M E N T S E C O N DA R Y M A R K E T Pace of Forbearance Exits Slows in September The MBA reports that nationwide forbearance volume continues to drop. However, the impact of Hurricane Ian may change that trend as servicers continue to navigate the aftermath of that storm. T he Mortgage Bankers Association (MBA) has reported that the total number of loans now in forbearance as of September 30, 2022, fell by three basis points from 0.72% of servicers' portfolio volume in the prior month to 0.69%. The MBA estimates there are cur- rently 345,000 U.S. homeowners in forbearance plans. In the MBA's latest Loan Monitoring Survey, the share of Fannie Mae and Freddie Mac loans in forbearance decreased two basis points from 0.32% to 0.30%, while Ginnie Mae loans in forbearance increased one basis point from 1.32% to 1.33%. The forbearance share of portfolio loans and private-label securities (PLS) declined 12 basis points from 1.26% to 1.14%. "The overall number of loans in forbearance dropped in September, but the pace of forbearance exits slowed to a new survey low and new forbearance requests continued to come in. This dynamic in turn prevented any substantial improvement in the forbearance rate," said Marina Walsh, CMB, MBA's VP of Industry Analysis. "The COVID-19 federal health emergency is still in effect and in most cases, borrow- ers can still seek initial COVID-19 hardship forbearance." One event which impacted the nation in September which may cause a rise in the number of forbearances is the wreckage left behind by Hurricane Ian. Updated estimates from CoreLogic of the damage and loss totals from Hurricane Ian found that total flood and wind losses will total in the $41-$70 billion range, making Hurricane Ian the costliest Florida storm since Hurricane Andrew made landfall in 1992. "In the near-term, the number of loans in forbearance will likely increase for another reason—the recent devastation caused by Hurricane Ian in Florida, South Carolina, and other states," Walsh added. "MBA's Loan Monitoring Survey requests that servicers report all loans in forbearance regardless of the borrower's stated reason—whether pandemic-related, due to a natural disaster, or an- other cause." Total completed loan workouts from 2020 and onward (repayment plans, loan deferrals/partial claims, loan modifications) that were cur- rent as a percent of total completed workouts increased to 78.70% last month from 78.31% in August. Of the cumulative forbearance exits for the period from June 1, 2020, through September 30, 2022, at the time of forbearance exit: • 19.6% resulted in a loan deferral/ partial claim. • 18.3% represented borrowers who continued to make their monthly payments during their forbearance period. • 17.3% represented borrowers who did not make all of their monthly payments and exited forbearance without a loss miti- gation plan in place yet. • 16.0% resulted in a loan modifi- cation or trial loan modification. • 11.0% resulted in reinstatements, in which past-due amounts are paid back when exiting forbear- ance. • 6.6% resulted in loans paid off through either a refinance or by selling the home. • The remaining 1.2% resulted in repayment plans, short sales, deed-in-lieus or other reasons. Regionally, the five states with the highest share of loans that were current as a percent of servicing portfolio included: Idaho, Washington, Colorado, Utah, and Oregon. The five states reporting the lowest share of loans that were current as a percent of servicing portfolio: Mississippi, Louisiana, New York, West Virginia, and Indiana. • Jacksonville, North Carolina,, with one in every 593 housing units with a foreclosure filing • Columbia, South Carolina with one in every 599 housing units with a foreclosure filing • Rockford, Illinois, with one in every 602 housing units with a foreclosure filing In terms of real estate-owned (REO) properties, lenders repos- sessed 10,515 U.S. properties through foreclosures in the third quarter of 2022, up 18% from Q2, and up 39% year over year. "Very few of the properties entering the foreclosure process have reverted to the lender at the end of the foreclosure," Sharga added. "In fact, nearly three times more homes were repossessed by lenders in the second quarter of 2019 than in the second quarter of 2022. We believe that this may be an indication that borrowers are leveraging their equity and selling their homes rather than risking the loss of their equity in a foreclosure auction." States that posted the largest number of completed foreclosures in Q 3 included: • Illinois with 1,331 REOs • Michigan with 729 REOs • New York with 695 REOs • Pennsylvania with 643 REOs • Ohio with 557 REOs Properties foreclosed in Q 3 2022 had been in the foreclosure pro- cess an average of 885 days, down from 948 days in the previous quarter, and down 4% from 924 days in the third quarter of 2021. States with the longest average foreclosure timelines for homes foreclosed in Q 3 2022 included: • Hawaii at 2,121 days • New Jersey at 2,002 days • Louisiana at 1,963 days • Kansas at 1,848 days • New York at 1,808 days States with the shortest average foreclosure timelines for homes foreclosed in Q 3 were: • Minnesota at 113 days • Mississippi at 167 days • Texas at 168 days • Nebraska at 168 days • Missouri at 172 days