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As the economy continues to improve amid the pandemic, mortgage forbearance rates continue to drop. However, applications are also decreasing. This could be due to a lack of housing inventory or an increase in coronavirus cases in some states across the U.S.

Here’s the latest from the Mortgage Bankers Association (MBA):

Forbearance Rates

According to the latest Forbearance and Call Volume Survey, there are now 4.2 million homeowners with loans in forbearance plans—a 8.47 percent decrease as of June 21. The share of Fannie Mae and Freddie Mac loans in forbearance decreased for the third consecutive week to 6.26 percent—a 5-basis point improvement. Additionally, Ginnie Mae loans in forbearance stayed flat at 11.83 percent.

“The overall share of loans in forbearance declined for the second week in a row, led by the third straight drop in GSE loans,” said Mike Fratantoni, MBA’s senior vice president and chief economist. “Many borrowers initially received a three-month forbearance term, and as of June 21, 17 percent of loans in forbearance have now been extended, with the largest share of those being Ginnie Mae loans.”

Added Fratantoni, “The level of forbearance requests remains quite low as of mid-June. The rebound in the housing market is likely one of the factors that is providing confidence to both potential homebuyers and existing homeowners during these troubled times.”

Mortgage Applications

According to the MBA’s Weekly Mortgage Applications Survey for the week ending June 26, applications decreased 1.8 percent on a seasonally adjusted basis from the previous week. On an unadjusted basis, the Index decreased 2 percent from the previous week. The Refinance Index dropped 2 percent from the previous week—74 percent higher YoY. The seasonally adjusted Purchase Index decreased 1 percent from the previous week, and the unadjusted Purchase Index dropped 2 percent from the previous week—15 percent higher YoY.

“Mortgage applications fell last week despite mortgage rates hitting another record low in MBA’s survey. Investors are contemplating the risks of the recent resurgence of COVID-19 cases to the labor market and economy, and Treasury rates and mortgage rates are moving lower as a result,” said Joel Kan, MBA’s associative vice president of Economic and Industry Forecasting. “After two months of strong growth, purchase applications declined for the second week in a row. The weakening in activity is potentially a signal that pent-up demand is starting to wane and that low housing supply is limiting prospective buyers’ options. The average purchase application loan size increased to a record high in our survey—more proof that tight inventory conditions are leading to faster price growth.”

Added Kan, “Refinance applications also decreased but remained 74 percent higher than a year ago. The 30-year fixed rate has been below the 3.5 percent mark since late March. It is possible that many borrowers have already refinanced or are waiting for rates to go even lower.”

Commercial/Multifamily Mortgage Debt

Outstanding debt for commercial/multifamily mortgages increased by $61.0 billion (1.7 percent) in the first quarter of 2020, according to the latest MBA quarterly report. The total debt increased to $3.72 trillion at the end of Q1, while multifamily debt increased $28.0 billion (1.8 percent) to $1.6 trillion from the fourth quarter of 2019.

“The rise in commercial and multifamily mortgage debt in the first three months of the year carried forward the strong level of activity during 2019. Rising property values, strong incomes and low interest rates supported increased borrowing and lending,” said Jamie Woodwell, MBA’s vice president of Commercial Real Estate Research. “With the onset of the COVID-19 pandemic, borrowing and lending has slowed, and some of the tailwinds from earlier this year have reversed.”

Added Woodwell, “The coming months are likely to see greater differentiation in debt levels, both by capital source and property type, as investors and lenders assess market conditions.”

Source: Mortgage Bankers Association