Why the End of Forbearance Will Not Lead to a Wave of Foreclosures
Many people who took advantage of federal mortgage payment forbearance during the COVID-19 pandemic are now just past or nearing their plan’s end date. This means millions of homeowners are now resuming their regular monthly mortgage payments, along with trying to make up the 6-12 months of missed payments from the forbearance period.
It’s hard not to wonder if this will be a repeat of the 2008 housing market collapse. People fear that homeowners, still underemployed due to the pandemic, will not be able to resume their monthly mortgage bills. Many skeptics say that this will lead to a wave of foreclosures that could cause the housing market to plummet in value. However, real estate experts say that the market today is nothing like it was back in 2008, and they do NOT anticipate an increase in foreclosures due to the end of forbearance plans.
How exactly is the housing market different today than it was back in 2008?
Fewer homeowners were affected by the pandemic than the housing market collapse
Over nine million homeowners were affected by the 2008 housing collapse, in contrast to just over 1.5 million currently using the mortgage payment forbearance program. That’s a huge difference, and it means that a lot fewer Americans were affected by the COVID-19 pandemic than the lending frenzy that led up to the events in 2008.
Homeowners have more equity
Ten percent is the magic number when it comes to having enough equity to sell your home. As long as the homeowner has 10% equity in the property, they can sell and will likely make enough to cover all of the associated seller costs, breaking even. Today, almost 90% of the homeowners using the forbearance program have over 10% equity in their homes. This means there would be no reason for them to favor foreclosure or a short sale over just selling their home via traditional means. Whereas on the other hand, back in 2008, homeowners had virtually no equity in the extra expensive homes they had purchased, so many chose to just give their homes to the bank overselling on the market.
Regulators are more prepared
The federal government has made several options available to help homeowners make up those payments missed during forbearance without causing undue financial stress, and even private mortgage lenders must follow the rules. Hard lessons were learned during the aftermath of the 2008 housing crisis, and the government realized that to stabilize the market and stop future foreclosures, they needed to step in with payment plans and other options for homeowners in need. Seeking to avoid a repeat of that situation, the federal government is offering even more options for government-backed mortgages, such as those through the VA, FHA, and USDA! Homeowners coming out of forbearance will likely be taking advantage of these alternatives to avoid foreclosure, which is why real estate experts do not believe there will be another housing market crash.
Don’t let fear of the unknown keep you from taking advantage of the various programs now available for homeowners to stay in their homes and have affordable payments. While the list of programs has grown during the pandemic, there has always been assistance available through certain government agencies and other organizations to make housing more affordable.
We anticipate that some homeowners coming out of forbearance will opt to sell their Tampa area homes, and that’s an area where we can provide assistance. If you’re a homeowner looking to sell your home on your own, or a realtor servicing clients in Tampa Bay, Benefit Title Services offers all the services you need to make the transaction as smooth as possible. Call us at (855) 286-9131 or contact us online to find out how we can help you sell your home today!
