What Will The End Of Forbearance Mean To The Market?

Hardships related to COVID-19 resulted in millions of Americans looking at a forbearance plan to stay in their homes and avoid foreclosure. That grace period, for some, will be coming to an end and it’s unclear how big the impact will be.

People who have been putting off payments must either resume them, sell their homes, or face foreclosure. Many are concerned the housing market will experience a flood of foreclosures like the recession 15 years ago.

According to mortgage data company Black Knight, as of June 29, 2.05 million homeowners (around 3.9 percent of mortgaged properties), remained in COVID-19-related mortgage forbearance plans. That’s a 6.6 percent decline from the previous month, which is the first dip since the COVID-19 crisis began.

Additionally, 4.73 percent of the nation’s mortgages were at least 30 days past due, almost 1.7 million were 90 days delinquent, though not in foreclosure – down from 2.15 million in February.

During the last housing crash, about 9.3 million households lost their home to a foreclosure, short sale, or because they gave it back to the bank. According to industry experts, there are several reasons we won’t see that level of foreclosures this time.

When stay-at-home orders were issued in early 2020, the fear was the pandemic would devastate the housing industry. Many experts projected 30 percent of all mortgage holders would enter the forbearance program, but only 8.5 percent did.

While foreclosure is a threat for some, the good news for them is the powerful state of the U.S. housing market. Housing prices have been increasing for a while, meaning people who are behind on mortgage payments and facing foreclosure could erase that debt with the amplified equity in their homes.

The possible number of foreclosures ensuing from the termination of the forbearance program is nowhere near the number of foreclosures coming out of the housing crash 15 years ago. Of the homeowners currently in forbearance, 87 percent have at least 10 percent equity in their homes.

Another factor keeping the nation from entering a similar housing crash is simply that the current market can absorb any listings that would come into the market. When foreclosures hit the market in 2008, there was already an excess supply of homes for sale, and the market is currently experiencing the exact opposite conditions today.

What’s more, the White House released a fact sheet explaining how homeowners with government-backed mortgages will be given further options to help them to keep their homes when exiting forbearance.

If their loan is government backed, borrowers won’t be required to make a lump payment to reimburse lenders for missed mortgage payments. Some institutions may choose to extend the terms of forbearance, while others might negotiate lower interest rates or extend the length of the mortgage to lower monthly payments.

If you’re thinking about selling your home before exiting forbearance, working with an experienced real estate agent who’s familiar with your market and its circumstances is key. As a leading real estate group in the Pikes Peak region, The Platinum Group Realtors are experts at helping buyers and sellers understand their market and how to make the best of your current circumstances.

The number one independent real estate firm in Colorado Springs, The Platinum Group combines top Realtors with the best tools and resources to provide home buyers with platinum service and platinum results.

For a no-obligation consultation, call The Platinum Group at (719) 536-4478.

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