September 17, 2021

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Mortgage News

Concern over foreclosure increases after forbearance ends ‘wildly overestimated,’ expert says

As the deferral periods are coming to an end, an expert says that no wave of foreclosures is to be expected. (iStock)

As the deferral periods expire and homeowners resume their mortgage payments, a mortgage and foreclosure expert said concerns about the foreclosure increase have been “greatly overestimated”. Today’s housing market offers numerous financial relief options for homeowners struggling to make their monthly payments.

Homeowners currently have an advantage, in part because of historically low interest rates, which leads to competition and high demand drive house prices soaring.

“Demographics (very large numbers of millennials are reaching the prime age for home buying), low interest rates and pandemic trends (migration from city renters to suburban homeowners) will continue to drive demand, but it will likely slow down a little until price increases slow down and maybe even correct a little in some of the higher priced markets, ”RealtyTrac Executive Vice President Rick Sharga said.

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RISING HOUSE PRICES Threatening to overheat the summer housing market

How will the housing market be affected?

Once homeowners leave their grace periods, they have more options are available to them to resume payments for their mortgage loan. ON new maintenance rule from the Consumer Financial Protection Bureau mandates that mortgage servants can postpone any missed payments to the end of a loan term and not modify the loan to increase monthly payments.

Since the US government’s mortgage forbearance program began, the number of homeowners has fallen from around 4.5 million in March 2020 to less than 2 million today. 86 percent of borrowers who exited the program did so successfully, Sharga said. About 900,000 borrowers are expected to exit by the end of 2021, and the rest of the program’s borrowers will exit gradually over the next nine months.

But if homeowners give up on forbearance, Sharga said, it will not lead to a significant increase in foreclosure activity and it will not have a major impact on the overall housing market.

“While some borrowers cannot recover from the financial hardship COVID has inflicted on them and face the choice of selling their home or losing it through foreclosure, there will not be enough of these properties to make up the supply-to-market imbalance Fix demand in the market and they shouldn’t have to be sold at such a large discount as to affect prices in a particular market, “he said.

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Why Foreclosures Stay Low And How To Avoid Them

Sharga mentioned several reasons why foreclosures will remain at all-time lows, including credit quality, which was exceptional when the pandemic entered. Despite the onslaught of natural disasters that drove the numbers soaring, default rates were below historical averages and foreclosure activity was 40% below normal.

“Concerns about borrowers going into foreclosure appear to have been grossly overestimated,” he said. In fact, the program worked exactly as intended and very likely saved millions of homeowners from unnecessary foreclosures.

“Homeowners currently hold a record amount of equity – over $ 2.3 trillion – and over 70% of homeowners have more than 20% equity, which gives them the ability to use that equity to get a lower monthly payment or sell the house (probably for a profit) instead of losing it to a foreclosure sale. “

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The recession caused by the coronavirus has hit some industries harder than others. Tavel, tourism, retail, restaurants, hospitality and entertainment, for example, have been hardest hit, and these industries tend to be more populated by tenants than homeowners, Sharga explained.

The economic recovery Exceeded expectations, However; Around 65% of the jobs lost have already been restored and the economy continues to grow at a healthy pace.

Final thoughts

Today’s situation in the housing market makes a wave of foreclosures much less likely as homeowners have multiple options if they continue to struggle with their monthly payments.

“The market momentum is benefiting homeowners in need today – with more demand than supply available, there is a ready market for buyers to buy properties from homeowners in dire financial straits,” Sharga said.

Homeowners struggling to make their payments can consider several options such as loan.

Contact Credible to speak to a mortgage refinance expert and have all of your questions answered Your refinancing goals, such as how you can lower your monthly mortgage payment with lower interest rates or remove private mortgage insurance from your existing mortgage by refinancing.

Do you have a finance-related question but don’t know who to contact? Email the credible money expert [email protected] and your question could be answered by Credible in our Money Expert section.