Fitch-rated bank servicers recorded a particularly high nonprime-loan modification rate at 40%, up from 10% a year ago, in line with widespread expirations of pandemic-related payment suspensions.
Loans in the heterogeneous private-label residential mortgage-backed securities sector haven’t generally been afforded the same standardized payment relief as the government-related market, but servicers handling the former have tended to follow the latter’s lead to the extent their investor agreements allow.
Nonprime modification rates have become a focal point as forbearance and other pandemic-related contingencies are rolled back because the extent to which the borrowers request alterations of their loan terms to accommodate long-term losses of income could serve as a bellwether for broader loan performance.
To date, the reduction in forbearance hasn’t had a dramatic effect on delinquency rates, according to Fitch, which reported that the amount of loans late by 60 days or more has plateaued.
This mirrors trends in the broader market to date.