Forbearance and Equity Will Help Prevent Mass Foreclosures This Fall

Dated: July 22 2020

Views: 231

Two Reasons We Won’t See a Rush of Foreclosures This Fall

Two Reasons We Won’t See a Rush of Foreclosures This Fall | MyKCM

The health crisis we face as a country has led businesses all over the nation to reduce or discontinue their services altogether. This pause in the economy has greatly impacted the workforce and as a result, many people have been laid off or furloughed. Naturally, that would lead many to believe we might see a rush of foreclosures like we saw in 2008. The market today, however, is very different from 2008.

The concern of more foreclosures based on those that are out of work is one that we need to understand fully. There are two reasons we won’t see a rush of foreclosures this fall: forbearance extension options and strong homeowner equity.

1. Forbearance Extension

Forbearance, according to the Consumer Financial Protection Bureau (CFPB), is when your mortgage servicer or lender allows you to temporarily pay your mortgage at a lower payment or pause paying your mortgage.” This is an option for those who need immediate relief. In today’s economy, the CFPB has given homeowners a way to extend their forbearance, which will greatly assist those families who need it at this critical time.

Under the CARES Act, the CFPB notes:

 “If you experience financial hardship due to the coronavirus pandemic, you have a right to request and obtain a forbearance for up to 180 days. You also have the right to request and obtain an extension for up to another 180 days (for a total of up to 360 days).” 

2. Strong Homeowner Equity

Equity is also working in favor of today’s homeowners. This savings is another reason why we won’t see substantial foreclosures in the near future. Today’s homeowners who are in forbearance actually have more equity in their homes than what the market experienced in 2008.

The Mortgage Monitor report from Black Knight indicates that of all active forbearances which are past due on their mortgage payment, 77% have at least 20% equity in their homes (See graph below):Two Reasons We Won’t See a Rush of Foreclosures This Fall | MyKCMBlack Knight notes:

“The high level of equity provides options for homeowners, policymakers, mortgage investors and servicers in helping to avoid downstream foreclosure activity and default-related losses.”

Bottom Line

Many think we may see a rush of foreclosures this fall, but the facts just don’t add up in this case. Today’s real estate market is very different from 2008 when we saw many homeowners walk away when they owed more than their homes were worth. This time, equity is stronger and plans are in place to help those affected weather the storm.

Also, if you or a loved one has been affected by the Coronavirus crisis, please look into the CARES Act for resources available to you. 
https://www.consumerfinance.gov/coronavirus/mortgage-and-housing-assistance/mortgage-relief/ 

Blog author image

Robin Muehlhauser - DRE#01460839

Specialties: Buyer's Agent, Listing Agent, Relocation, Consulting My team's passion is making your Real Estate goals a reality. We take the time to meet with our customers to understand their wants a....

Latest Blog Posts

The Current Real Estate Market Needs New Sellers

Homebuyer Demand Is Far Above Last Year’s PaceHomebuying has been on the rise over the past few months, with record-breaking sales powering through the market in June and July. Buyers are

Read More

What Effect will the 2020 Election Have on the Real Estate Market?

How Will the Presidential Election Impact Real Estate?The year 2020 will be remembered as one of the most challenging times of our lives. A worldwide pandemic, a recession causing historic

Read More

Get a Pre-Approval for Buying a House in a Hectic Market

Why Is It so Important to Be Pre-Approved in the Homebuying Process?You may have heard that pre-approval is a great first step in the homebuying process. But why is it so important? When

Read More

Why You Should Move to the Greater Sacramento Area

The Bay and Los Angeles are so expensive, yet they seem to get more and more crowded every day. You’re working from home anyway, and you’re planning on holding on to that when it’s

Read More