Fewer borrowers are now in mortgage relief programs that allow them to delay their monthly payments due to the coronavirus crisis. The mortgage market, however, is not out of the woods yet. Far from it.

After a steep rise in April and a flattening toward the end of May, the number of borrowers in both government and private-label mortgage forbearance programs dropped by 34,000 last week, according to new numbers from Black Knight, a mortgage technology and data provider. This is the first drop since the start of the pandemic.

There are still 4.73 million loans in forbearance, representing 8.9% of all active mortgages. Those loans together make up just over $1 trillion in unpaid principal. By loan type, an estimated 7.1% of all Fannie Mae and Freddie Mac loans and 12.3% of FHA/VA mortgages are in forbearance.

“The decline was actually greater among government-backed mortgages, which saw 43,000 fewer total forbearance plans than last week, but this was partially offset by an increase of 9,000 new plans on mortgages held in bank portfolios and private-label securities,” said Anthony Jabbour, CEO of Black Knight.

The vast majority of loans in forbearance, about 3.5 million, are government-backed. The government’s bailout program, part of the CARES Act economic relief package, allows borrowers to miss monthly payments for at least 3 months and up to a year. Those payments must be made up in the future, either through repayment plans, or when the home is sold or the mortgage refinanced.

While the decline in overall loans in forbearance is promising, there was one red flag in the data. In April nearly half of all borrowers who went into forbearance actually ended up making their monthly mortgage payment after all. As of May 26, that share fell to just 22%.

“If that trend holds true through the end of the month, the market should be prepared for another likely rise in the delinquency rate for May,” said Jabbour. “Also, expanded unemployment benefits are scheduled to end on July 31. It remains to be seen how that will impact both forbearance requests and overall mortgage delinquencies.”

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