COVID-19 has caused a unique type of housing crisis. Widespread job-loss has resulted in nearly one-in-five renters not being able to pay their rent (according to statistics from cbpp.org where you can also find a chart with a state-by-state breakdown). At the same time, another 10.3 million people are estimated to be a part of households unable to pay their mortgages. While efforts have been made to ease the burden of rent and mortgage payments for those that have lost income, those efforts will not last forever.
Currently, foreclosure moratoriums for those with a federally backed loan have been extended until June 30, 2021. There will even be an additional six-month period (in three-month increments) of forbearance available to those who entered into forbearance on, or before, June 30 (click here to read more). Overall, the Mortgage Bankers Association estimates 2.7 million homeowners were in forbearance as of January 31, 2021. While the number of delinquent loans (classified as any loans with payments not made within the terms of the original mortgage agreement according to MBA) have decreased from the previous quarter, it is still a year-over-year increase.
While forbearances are decreasing and moratoriums have been extended, the sad fact is we will still see a surge of foreclosures at some point in the near future. Fortunately, it looks like people are slowly coming out of forbearance as the number of delinquent loans in Q4 of 2020 decreased from previous quarters. So, what could the months after the moratoriums could look like?
There may not be the flood of foreclosures that was predicted
The implementation of the CARES Act has played a primary role in preventing families from losing their homes during the pandemic. Many expected a flood of foreclosures post-forbearance, but the Act didn’t just put off an inevitable foreclosure, it allowed struggling families to catch up and find financial solutions. From June to November 2020, the number of homeowners entering forbearance had been decreasing, as noted by the Wall Street Journal. This gave hope that people were returning to work and no longer struggling to make their mortgage payments.
However, the same WSJ article does note a flattening of that decrease in both December and January to a consistent 5.5 percent of homeowners in forbearance. The latest from MBA notes the latest decrease to 5.14 percent of homeowners in forbearance, which is equal to approximately 2.6 million homeowners.
But we just can’t know…
While many expect that flood of foreclosures to occur despite the decrease of homes in forbearance, this article from dsnews.com accurately states that it’s just too hard to predict. Sure, 2.6 million homeowners are in forbearance and that is no small number, but how can we know how many of those homeowners won’t be able to resume payments once the moratoria end? The same article suggests a wave of 500,000 – 700,000 foreclosure throughout 2021.
It will be difficult to predict how so many homeowners will handle exiting forbearance and thankfully moratoriums are being pushed further out to allow them more time to find a resolution. While it’s safe to say no one wants to see families in foreclosure, many will need the assistance of a real estate professional to guide them through the process and those professionals will find The Warren Group’s foreclosure data helpful in identifying those that could use assistance.
Reach out to a data specialist today to access New England’s most complete foreclosure database and be among the first to know of new petitions, auctions, and REO’s.