More borrowers are losing their homes now than they were earlier in the pandemic.
the main points
- Mortgage activity is up now that the mortgage bearing protection for many borrowers has ended.
- It can create an opportunity for new home buyers.
- If you get out of patience and are worried about making payments, you may have options, such as selling and refinancing.
When the COVID-19 pandemic first emerged and unemployment spread, it became clear that many homeowners would risk losing their homes if help was not provided immediately. The government responded by taking on mortgages — an option that predated the pandemic, but was not universally guaranteed.
Under forbearance, mortgage borrowers can pause their home loan payments without penalty. Typically, loan service providers can approve or reject forbearance requests at will, but during a pandemic, any borrower who requests must be approved. And all the borrowers had to do was testify to the existence of financial hardships to be given patience, which makes it pretty much a certainty.
Those who sought relief under patience during the pandemic were allowed to hold their mortgage payments on hold for up to 18 months. But that means borrowers who got impatient early in the pandemic saw protections run out last fall. Not surprisingly, foreclosure activity has since rebounded.
In November, there were nearly 19,500 properties in the United States with foreclosure files, according to ATTOM data. This represents an increase of 94% over the previous year. And with more borrowers running out of patience, the number of homes subject to foreclosure could increase.
Good news for the housing market?
The US housing market has been suffering from inventory hunger since mid-2020. This has made home buying a challenge. If foreclosure activity continues to rise, it may result in more inventory available to potential buyers. So this is a potential silver lining.
However, buying a closed home can be a riskier prospect than buying a regular home. Too often, homes in foreclosure have been neglected and not in the best condition. But for buyers willing to take this risk, foreclosed real estate may provide an opportunity to purchase a home relatively cheaply.
How to avoid foreclosure
Many borrowers whose mortgages are out of patience are still unable to afford their monthly payments. But that doesn’t automatically mean that foreclosures are in their future.
Currently, home values are rising nationally. So borrowers who can’t make their mortgage payments may have the option to sell their property for enough money to pay off their home loans and move away.
Moreover, many loan service providers these days are taking steps to help distressed borrowers to stay home after getting impatient. Those who are impatient and cannot afford to pay can ask about a loan modification, as mortgage terms are changed to make these loans more affordable. Refinancing may also be an option for some post-mortgage borrowers, and may also result in lower monthly mortgage payments.
The fact that foreclosure numbers have skyrocketed since late 2020 is no surprise. At the time, borrowers who could not repay were being held back. But those who are getting impatient now and can’t pay aren’t necessarily doomed to foreclosure. Struggling homeowners can contact their loan service and see what options are available to them, which could prevent them from defaulting and facing serious repercussions.
Historic opportunity to save thousands from your mortgage
Chances are that interest rates will not remain at multi-decade lows for much longer. That’s why taking action today is so important, whether you want to refinance and lower your mortgage payments or you’re ready to start the process of buying a new home.
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