Written by Kentwood Real Estate President and CEO Gretchen Rosenberg
A question we’ve been asked recently is whether in 2021 we will face a foreclosure crisis when the forbearance mortgage relief options come to an end? If you remember the housing crisis that began in 2008, you might be feeling like you’re revisiting a familiar scene. However familiar it may feel, plans have been put in place within the forbearance regulations to ensure history doesn’t repeat itself.
Homeowners this time around are able to request 180 days of mortgage relief through forbearance. Once that first 180 days expires, they’re entitled to request 180 additional days, bringing the total to 360 days of deferred payment eligibility.
It would be wise for homeowners in forbearance to stay in touch with their lender, and create a plan for the deferred payments as a step toward avoiding foreclosure. By planning and communicating with your lender, foreclosure doesn’t have to be one of your options.
Some homeowners who are in the forbearance program have concerns they’ll have to pay their deferred payments back in a lump sum at the end of forbearance. Fortunately, that’s not the case. Fannie Mae explains:
“You don’t have to repay the forbearance amount all at once upon completion of your forbearance plan…Here’s the important thing to remember: If you receive a forbearance plan, you will have options when it comes to repaying the missed amount. You don’t have to pay the forbearance amount at once unless you are able to do so.”
Fewer than thought
The number of people in the program has been decreasing. Fewer people than initially expected are still in forbearance, so the number of homeowners who will need to work out alternative payment options is declining.
This means there are fewer and fewer homeowners at risk of foreclosure, and many who initially applied for forbearance didn’t end up needing it. Mike Fratantoni, Senior Vice President and Chief Economist at the Mortgage Bankers Association (MBA), explains:
“Nearly two-thirds of borrowers who exited forbearance remained current on their payments, repaid their forborne payments, or moved into a payment deferral plan. All of these borrowers have been able to resume – or continue – their pre-pandemic monthly payments.”
For those who are still in forbearance and unable to make their payments, foreclosure isn’t the only option left. In their Homeowner Equity Insights Report, CoreLogic indicates:
“In the second quarter of 2020, the average homeowner gained approximately $9,800 in equity during the past year.”
Many homeowners have enough equity in their homes today to be able to sell their houses instead of foreclosing. Selling and protecting the overall financial investment may be a solid option for many homeowners. As Ivy Zelman, Founder of Zelman & Associates, mentioned in a recent podcast:
“The likelihood of us having a foreclosure crisis again is about zero percent.”
If you’re currently in forbearance or think you should be because you’re concerned about being able to make your mortgage payments, reach out to your lender to discuss your options and next steps. Having a trusted and knowledgeable professional on your side to guide you is essential in this process and might be the driving factor that helps you stay in your home.
Our Prosperity Home Mortgage team can help if you’d like to discuss forbearance, refinancing, or would like to purchase a home and need to get a mortgage. You can find our PHM team on our website! Visit www.Kentwood.com
Check with your own advisors before making any decisions based on this information. The information contained in this article is not intended to be construed as investment advice. Kentwood Real Estate does not guarantee the accuracy or completeness of the information. Nothing should be construed as investment advice. Conduct your own research and obtain professional advice before making any investment decisions. Kentwood Real Estate will not be liable for any loss or damage caused by your reliance on the information or opinions contained in this article or blog.