Why Foreclose is NOT in the Forecast

For many, 2008 is a reminder of how quickly a housing crisis can occur. 

When the mortgage forbearance program announced a plan to allow homeowners to delay mortgage payments, there was some initial concern. 

But it seems lenders and homeowners alike have learned from the past. 

Forbearance in 2020 

When a homeowner enters forbearance, the mortgage lender freezes payment requirements for a set amount of time. In 2020, homeowners can request forbearance for 180 days, with the option to request an additional 180 should that time expire, bringing the total to 360 days of deferred payment. 

While some feared these options would lead to a rise in foreclosures in 2021, experts no longer believe that will be the case. Only 10% of homeowners requested forbearance this year, and that number decreased to 5.6% in October, according to Black Knight

Of the 5.7 Million homeowners who received forbearance, less than half extended their forbearance plan once the original 180 days expired. More than 2.3 Million removed their forbearance before the 180 days ended, and 500,000 paid off their mortgage. This leaves a small percentage of those on a forbearance plan with expired or delinquent payments. 

Factors Impacting Homeowners Today

With help from banks and lenders, homeowners are in a much different place than they were in 2008. Here are some of the factors that are currently helping homeowners today:

  1. Increased home equity gives homeowners more interest in their homes.
  2. Low inventory, combined with active buyers, means houses are selling quickly. In 2008, the opposite was true.
  3. Property values are appreciating, while in 2008, they were depreciating. 

These factors put homeowners in a much better position than a decade ago. In addition, lenders feel more comfortable providing options to those who do need to request forbearance. Some of those options include: refinance repay, repayment plan, deferral program, or a modification. 

All of these factors combined mean that, unlike during the housing crisis, foreclosure isn’t looming. Of the 5.6% of homeowners currently in a forbearance plan, the vast majority will avoid foreclosure and remain in their homes. 

Questions? Contact Us!