Pandemic-related mortgage forbearance programs are expiring, but hundreds of thousands of homeowners continue to struggle with payments. When loan modifications fail to help, distressed homeowners may find themselves at risk of foreclosure.
Pandemic-related aid allowed financially struggling homeowners to miss their house payments for, in some cases, up to 18 months. But as those programs expire, hundreds of thousands of homeowners could lose or be forced to sell their homes as mortgage forbearance programs expire.
Over half of the 7.7 million borrowers who piled into these forbearance programs are current on their mortgages and making payments again. About 23% of borrowers either sold their homes or refinanced their mortgages to make them more affordable. Roughly 7%, or just over half a million, are in active loss mitigation with their lenders, still trying to work out a loan modification plan. While 3% of borrowers, or approximately 264,000 are now delinquent on mortgages after their programs expired, and 38,000 are in active foreclosure.
While servicers have been offering loan modifications and lower interest rates, some borrowers who lost their jobs, or their businesses simply can not pay. Servicers also advanced money to borrowers for taxes and insurance during their forbearance period, and while that can be spread over a year of payments, some borrowers can’t afford the burden of these additional expenses.
See Roadmap For Homeowners Existing Forbearance
Short Sale or Loan Modification
The Solution
There is another option that may be getting overlooked – selling. Thanks to a massive run on housing during the pandemic, home prices are up nearly 20% from a year ago.
As a result, approximately 87% of homeowners currently in foreclosure have positive equity, according to an analysis by RealtyTrac, a foreclosure listing site. These borrowers owe less than their homes are worth. The same is the case for the vast majority of the 264,000 homeowners who are now delinquent but not yet in foreclosure.
Roughly 73% borrowers in foreclosure have more than 20% equity, and about 28% have more than 50% equity.
This could be a boon to an incredibly lean housing market which has seen record low inventory in recent years. Builders have not been able to ramp up production significantly, due to labor and supply-chain issues. Some estimates are that the market needs about one million more homes to satisfy demand. While these homes exiting forbearance wouldn’t fill this deficiency gap entirely, they could be a dramatic first step to bringing balance to the market.
While having equity may not have prevent these owners from defaulting on their loans, it should provide them the opportunity to sell their homes at a profit, while satisfying their debt to their lender and avoiding foreclosure with money left over and a chance for a fresh start.
Unfortunately this has not been the case so far as Black Knight found that nearly a third of borrowers who enter the foreclosure process with at least 40% equity in their homes go to foreclosure anyway.
If you are a homeowner who is having trouble making your mortgage payment and are interested in exploring your options including the listing of your home as a short sale, if you now owe more than your home is worth, please give us a call today at 614.332.6984. We’re here to help you!
As local real estate short sale specialists we can help you make sense out of your options.
The Opland Group Specializes in Real Estate Sales, Luxury Home Sales, Short Sales in; Bexley 43209 Columbus 43201 43206 43214 43215 Delaware 43015 Downtown Dublin 43016 43017 Gahanna 43219 43230 Grandview Heights 43212 Galena 43021 Hilliard 43026 Lewis Center 43035 New Albany 43054 Pickerington 43147 Polaris Powell 43065 Upper Arlington 43220 43221 Westerville 43081 43082 Worthington 43235
