Many homeowners have struggled with paying their monthly mortgage payments since the start of the pandemic. The Federal Housing Administration (FHA) provided a new extension that pushed the expiration date to the end of September. While this protection helps families around the country, what will happen remains a popular question. The main concern for many is foreclosures. However, the number of homeowners in forbearance has decreased to 3.5 percent. Plus, the home equity people hold is enough to sell their homes if need be. It can be stressful, but there are more options than you think.
The forbearance plan ends next month. Will the market experience a wave of foreclosures? Experts persist that the foreclosure crisis of 2006 will not repeat itself. Fewer homes are in danger. Last year, industry professionals projected about 30 percent of all mortgage holders would need to enter the forbearance program when the pandemic first hit. However, less than 10 percent did. Since then, the 8.5 percent of those who entered any forbearance program has decreased to 3.5 percent. That means 1,863,000 million mortgages are still in forbearance. Compare that to the 9.3 million mortgages that were in forbearance years ago, and we are in a much better place.
Another main factor is home equity gains in 2021. Sixty-two percent of homeowners in the U.S. hold mortgage loans. Of that percentage, they saw a 19.2 percent increase in home equity from 2020 to 2021. According to Corelogic, it created a gain of $33,400 annually for homeowners. Black Knight reported of the 1.86 million homeowners currently in forbearance, 87 percent have at least 10 percent equity or more in their homes. This equity gives hope to homeowners who could sell their house for more than owed and avoid foreclosure.
In 2008, supply was in excess unlike the lack of inventory supply today – a difference of 9 months supply to 2.5 months. Any new listings will quickly be absorbed by the market, insists the National Association of Realtors (NAR).
With the new protection measures, many homeowners may still be eligible for relief.
Here are the revisions of the CARES Act’s measures made by the FHA:
- An end to the foreclosure moratorium on single-family foreclosures on July 31
- A moratorium on single-family eviction extended from July 31 to Sept. 30, 2021
- An extension of the deadline to request mortgage forbearance from June 30 to Sept. 30, 2021
- The extension of a program to help homeowners reduce monthly mortgage payments by 25% or more
A 2020 Urban Institute survey found that approximately 530,000 delinquent homeowners had not requested forbearance relief — despite being eligible. Why? A National Housing Resource Center survey from last year suggested that homeowners may have feared having to make a significant lump-sum payment at the end of forbearance — it’s just one of many options — or simply, not known about the program. Others may have had difficulty connecting with their loan servicer. – CNet
The Department of Housing and Urban Development stated:
To assist homeowners who remain at risk of falling behind on their mortgage payments due to COVID-19, FHA is extending the time period for homeowners to start new forbearance plans to September 30, 2021. Homeowners who have not previously been in COVID-19 forbearance can request this pause or reduction in mortgage payments. The COVID-19 Forbearance for homeowners who newly request forbearance assistance between July 1, 2021, and September 30, 2021, is for six months.
For homeowners who received a forbearance from their mortgage servicer between July 1, 2020, and September 30, 2020, FHA is providing one additional three-month forbearance extension for those who need and request additional time to recover financially before resuming mortgage payments.
The new steps the Department of Housing and Urban Development (HUD), Department of Agriculture (USDA), and Department of Veterans Affairs (VA) are announcing will aim to provide homeowners with a roughly 25% reduction in borrowers’ monthly principal and interest (P&I) payments to ensure they can afford to remain in their homes and build equity long-term. This brings options for homeowners with mortgages backed by HUD, USDA, and VA closer in alignment with options for homeowners with mortgages backed by Fannie Mae and Freddie Mac.
If you are currently in a forbearance program, your lender will reach out to you to discuss your options and next steps. Additional services like an extended forbearance period, reduced payment amount, or other repayment options may be available to you.
Make sure to ask all of your questions so you are clear on how to proceed. Request to have any new plans in written form. You may have to come up with an exit strategy if you have fully exhausted your forbearance. Your lender is there to make sure you are not stuck. Reach out to directly and start sooner than later so nothing takes you by surprise.
This article is intended to be accurate, but the information is not guaranteed. Please reach out to us directly if you have any specific real estate or mortgage questions or would like help from a local professional. The article was written by Sparkling Marketing, Inc. with information from resources like CoreLogic, NAR, FHA.