Examining Resolution of Mortgage Forbearances and Delinquencies – May 2022

The Risk Assessment, Data Analysis, and Research (RADAR) Group reveals that most borrowers seeking loan modifications will not see their monthly payments reduced to their programs’ targeted amounts because of sharply rising mortgage interest rates.

While mortgage forbearances and delinquencies are normalizing at or below prepandemic levels, sharply rising mortgage interest rates mean that most borrowers seeking loan modifications will not see their monthly payments reduced by their existing programs’ targeted amounts. In this report, after we update our numbers for current market conditions, we compute expected payment reductions for the two major Agencies’ existing loan modification programs¹ at current interest rates to show that most borrowers will not achieve their targeted payment reductions. We then discuss ways in which these programs can be adjusted, or are being adjusted, so that almost all borrowers seeking loan mods will achieve their targeted payment reductions.

^[1] In this case, the Agencies refer to the two government-sponsored enterprises (GSEs), Fannie Mae and Freddie Mac; the Federal Housing Administration (FHA); and Veterans Affairs (VA).