The Reality of Mortgage Forbearance Numbers
When the pandemic hit, many experts predicted that the real estate industry would crash. They feared that pandemic control measures would shut down whole industries, which would cause millions to become unemployed. In turn, this would cause millions to fall behind on their bills, including their mortgage payments. Eventually, falling behind on mortgage payments would turn into a wave of foreclosures, which would flood the housing market with inventory. Most of these predictions came to fruition. However, extreme measures were taken to prevent the wave of foreclosures and the ensuing market crash. Today, there are still millions of homeowners in forbearance. However, forbearance numbers are dropping rapidly. Today’s forbearance numbers do not paint a complete picture. To understand the reality of the most recent mortgage forbearance numbers, the team at Peoples Choice Mortgage is here to take you behind the data.
The Latest Mortgage Forbearance Numbers
Forbearance numbers dropped significantly as soon as the calendar turned to June. The number of mortgages in forbearance dropped by 3.2%. That is a drop of about 72,000. This leaves about 2.12 million homeowners still in some sort of forbearance plan with their lender. Forbearances reached their peak in June of 2020. Today’s numbers are less than half of what they were about one year ago. It is clear that this is a huge improvement.
While today’s numbers regarding the number of mortgages in forbearance seem positive, last month’s drop is somewhat misleading. A large number of mortgages that have exited forbearance plans is due to the expiration of the plans. As part of the government intervention to prevent a collapse in the housing market, forbearance extensions were mandated. These extensions have started to expire once the calendar turned to June. While we might have the urge to celebrate this month’s drop in forbearances, how much we should celebrate is unclear. Once a forbearance plan expires, homeowners have the option to reapply for a new forbearance plan. Whether a new plan is accepted is dependent upon their financial situation and their lender. This means that there is a chance that some of these homeowners will return to a forbearance plan in the coming weeks or months. While others might end up inching closer to foreclosure.
There is even more reason to be cautious about the May numbers. Many homeowners who were likely to meet the terms of their forbearance plans have already left their plans. Only about 35% of homeowners remain in forbearance plans. The problem is that those who remain in these programs are the most financially vulnerable. The remaining homeowners typically have low credit scores, high debt, and low income. A statggering 70% of homeowners who are still in forbearance are not making any mortgage payments at all.
The current state of today’s forbearance rolls indicates that a wave of foreclosures still might be on the horizon, even if it will be much smaller than was initially feared. A few months ago, the Consumer Protection Financial Bureau proposed a rule that would delay all foreclosures until at least 2022. However, this rule has not been passed, which means that there is still a great deal of uncertainty regarding foreclosures. If over a million homes go into foreclosure, that would add to a huge influx in homes to purchase over the course of the next couple years. Of course, there is always a chance that this rule is finalized or additional rules might be adopted. At this time, what is going to happen to the number of foreclosures is still a known unknown.
Final Thoughts
The pandemic is receding, but the impact of it is still being felt. While many of us are resuming activities that we have not been able to experience for a year, many are still trying to pick up the pieces. Forbearance numbers have dropped dramatically since the June 2020 peak. However, the expiration of extension periods means that the danger has not entirely passed us by. While the great housing market crash that was predicted will not materialize, today’s forbearance situation should not be taken lightly. Owning a home is a cornerstone of the American dream. Even if only one homeowner loses their home because of the pandemic, it is still a tragedy. Everyone deserves the right to own a home and it is horrible that a virus can take it away from anyone.
While the pandemic is improving, we are not out of the woods yet. Not everyone who lost their jobs has been able to catch up on lost income. Millions are still behind on their bills. If you are having trouble meeting your mortgage payments or are in a forbearance program, you should contact us. Technically, a forbearance agreement is between a homeowner and their lender. Theoretically, these agreements do not necessarily involve your mortgage broker.
However, if you are a client with Peoples Choice Mortgage we still want to hear from you. Our goal is to help everyone achieve their dream of owning a home. If that dream is at risk because you are in forbearance or might need to be, please reach out. We would love to speak with you about your situation and possibly offer some guidance. We might not be able to change your agreement with your lender, but we might be able to offer some insight that can help you manage your situation. From the moment you speak with us, we are committed to help you make your dream of owning a home a reality. That commitment does not end once you close on your house. When you meet with our mortgage brokers, you become part of our family, which means we are here to help through thick and thin.
