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More borrowers are getting forbearance modifications

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The total number of loans in forbearance decreased to 2.06% as of Oct. 31, shows MBA November 8, 2021, 4:00 pm By Flávia Furlan Nunes

DISCLAIMER: As the COVID-19 public health situation evolves, new regulations are being continually issued. This page/story/information may not include the most recent information.

Forbearance predictably declined across the board last week as exits accelerated, but more borrowers are going into plan modifications because they are still struggling to recover their pre-pandemic income.

The total number of loans in forbearance decreased by nine basis points to 2.06% as of Oct. 31, according to the latest report from the Mortgage Bankers Association (MBA). In the previous week, the rate dropped six basis points to 2.15%.

Just over one million homeowners are still in forbearance plans. The survey included data on 36.6 million loans serviced as of Oct. 31, 73% of the first-mortgage servicing market. This is the last MBA’s weekly survey, as the trade group is moving to a monthly report.

Fannie Mae and Freddie Mac loans in forbearance declined five basis points to 0.92%. Meanwhile, Ginnie Mae loans decreased by 13 bps to 2.52%

The most notable decline was in the independent mortgage bank portfolio, which dipped 15 basis points to 2.28%. The share of private-label securities (PLS) loans in forbearance fell 13 basis points to 5%. For depository servicers, the percentage declined 5 bps to 2.02%.

According to Mike Fratantoni, the MBA’s senior vice-president and chief economist, more borrowers exiting plans in the last week of October went into modification, “a sign that they have not yet regained their pre-pandemic level of income.”

“The strong job market report from October, with another drop in the unemployment rate and a pickup in wage growth, is a positive sign for homeowners still struggling to get back on their feet,” he added.

The survey shows that 15.8% of total loans in forbearance were in the initial stage last week, and 73.9% were in a forbearance extension. The remaining 10.3% were re-entries.

Weekly call volume for servicers was up, from 5.9% of the servicing portfolio volume the week prior to 6.5%.

During the last 15 months, MBA’s data revealed that 29.1% of exits resulted in a loan deferral or partial claim. Also, 20.4% represented borrowers who continued to pay during the forbearance period.

However, 16.7% were borrowers who did not make their monthly payments and did not have a loss mitigation plan. In addition, 13.4% resulted in a loan modification or a trial loan modification, compared to 13.1% in the previous week.

Total requests were at 0.04% of servicing portfolio volume, while exits represented 0.17% of the total – in the previous week, the share was 0.09%, the report said.

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Michigan license number:   DM-0016282 Available to the public and licensed in Michigan.

Section 13(1)  When a licensee establishes a debt management plan for a debtor, the licensee may charge and receive an initial fee of $50.00

Section 13(2)  A licensee shall attempt to obtain consent to participate in a debt management plan from at least 51%, in number or dollar amount, of the debtor’s creditors within 90 days after establishing the debt management plan. If the required consent is not actually received by the licensee, the licensee shall provide notice to the debtor of the lack of required consent and the debtor may, at its option, close the account. If the debtor decides to close the account, any unexpended funds shall be returned to the debtor or disbursed as directed by the debtor.

Sec. 14. (1) A contract between a licensee and debtor shall include all of the following:

(a) Each creditor to which payments will be made and the amount owed each creditor. A licensee may rely on records of the debtor and other information available to it to determine the amount owed to a creditor.

(b) The total amount of the licensee’s charges.

(c) The beginning and termination dates of the contract.

(d) The principal amount and approximate interest charges of the debtor’s obligations to be paid under the debt management plan.

(e) The name and address of the licensee and of the debtor.

(f) Any other provisions or disclosures that the director determines are necessary for the protection of the debtor and the proper conduct of business by a licensee.

Sec. 18. (1) In addition to the fee described in section 13(1), a licensee may charge a reasonable fee for providing debt management services under a debt management plan. The fee under this subsection shall not exceed 15% of the amount of the debt to be liquidated during the express term of the plan.

(2) A licensee may offer a debtor the option to purchase credit reports or educational materials and products, and charge a fee to the debtor if the debtor elects to purchase any of those items from the licensee.  Fees charged under this subsection are not subject to the 15% limitation on fees described in subsection (1).

(3) Except for a cancellation described in subsection (4), in the event of cancellation of or default in the performance of the contract by the debtor before its successful completion, a licensee may collect $25.00 in addition to any fees and charges of the licensee previously received by the licensee. This $25.00 fee is not subject to the 15% limitation on fees and charges under subsection (1).

(4) A contract is in effect when it is signed by the licensee and the debtor and the debtor has made a payment of any amount to the licensee. The debtor has the right to cancel the contract until 12 midnight of the third business day after the first day the contract is in effect by delivering written notice of cancellation to the licensee. A cancellation described in this section is not subject to, and a licensee shall not collect, the fee described in subsection (3).

(5) If a debtor fails to make a payment of any amount to a licensee within 60 days after the date a payment is due under a contract, the licensee may, in its discretion, cancel the debt management contract if it determines that the plan is no longer suitable for the debtor, the debtor fails to affirmatively communicate to the licensee the debtor’s desire to continue the plan, or the creditors of the debtor refuse to continue accepting payments under the plan.

(6) A licensee shall not contract for, receive, or charge a debtor an amount greater than authorized by this act. A person that violates this subsection, except as the result of an inadvertent clerical or computer error, shall return to the debtor the amount of the payments received from or on behalf of the debtor and not distributed to creditors, and, as a penalty, an amount equal to the amount overcharged.

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