1. There Are Fewer Homeowners in Trouble This Time
38.6% left the program paid in full
- 19.9% made their monthly payments during the forbearance period
- 11.8% made up all past-due payments
- 6.9% paid off the loan in full
44% negotiated work-out repayment plans
- 29.1% received a loan deferral
- 14.1% received a loan modification
- 0.8% arranged a different repayment plan
0.6% sold as a short sale or did a deed-in-lieu
16.8% left the program still in trouble and without a loss mitigation plan in place
2. Those Left in the Program Can Still Negotiate a Repayment PlanAs of last Friday, the total number of mortgages still in forbearance stood at 890,000. Those who remain in forbearance still have the chance to work out a suitable plan with the servicing company that represents their lender. And the servicing companies are under pressure to do just that by both federal and state agencies.
“The [Consumer Financial Protection Bureau] and state [Attorneys General] look like they’re adopting a ‘zero tolerance’ approach to mortgage servicing enforcement. Likely that this will limit #foreclosure activity for a good part of 2022, while servicers explore all possible loss [mitigation] options.”
3. Most Homeowners Have More Than Enough Equity To Sell Their HomesFor those who can’t negotiate a solution and the 16.8% who left the forbearance program without a work-out, many will have enough equity to sell their homes and leave the closing with cash instead of facing foreclosures.
“Not only have equity gains helped homeowners more seamlessly transition out of forbearance and avoid a distressed sale, but they’ve also enabled many to continue building their wealth.”
4. There Have Been Far Fewer Foreclosures Over the Last Two YearsOne of the seldom-reported benefits of the forbearance program was that it allowed households experiencing financial difficulties prior to the pandemic to enter the program. It gave those homeowners an extra two years to get their finances in order and work out a plan with their lender. That prevented over 400,000 foreclosures that normally would have come to the market had the new forbearance program not been available. Otherwise, the real estate market would have had to absorb those foreclosures. Here’s a graph depicting this data:
5. The Current Market Can Easily Absorb Over a Million New ListingsWhen foreclosures hit the market in 2008, they added to the oversupply of houses that were already for sale. That resulted in over a nine-month supply of listings, and anything over a six-month supply can cause prices to depreciate.
“Total housing inventory at the end of November amounted to 1.11 million units, down 9.8% from October and down 13.3% from one year ago (1.28 million). Unsold inventory sits at a 2.1-month supply at the current sales pace, a decline from both the prior month and from one year ago.”A balanced market would have approximately a six-month supply of inventory. At 2.1 months, the market is severely understocked. Even if one million homes enter the market, there still won’t be enough inventory to meet the current demand.
The end of the forbearance plan will not cause any upheaval in the housing market. Sharga puts it best:
“The fact that foreclosure starts declined despite hundreds of thousands of borrowers exiting the CARES Act mortgage forbearance program over the last few months is very encouraging. It suggests that the ‘forbearance equals foreclosure’ narrative was incorrect. . . .”SOURCE: KCM.COM