What is going to happen when the forbearances hit the market?
Watch the original video: What happened to all of the Forbearances?
Monthly Mortgage Market Update for September 2021. In this month’s video & blog, I will talk about the forbearance program created through the CARES ACT and the options available when exiting a forbearance. I will also touch on current mortgage rates. Watch the video above to learn more. (Below is a summary of each topic I discussed in the video)
⚠️ What is going to happen when the forbearances hit the market?
In 2020 when Covid initially hit, 1.6 million homeowners took advantage of some form of a mortgage forbearance program through the CARES ACT. Beginning in October 2021, 850,000 homeowners will be exiting the program, with many more to come over the next few months. While many are still struggling financially, a lot of people are concerned, and rightfully so. Some are speculating that this will begin another foreclosure wave or housing crisis, but this is not the case.
For those exiting their forbearance there are 4 options available before they will have to consider a short sale or foreclosure. We believe that many homeowners will choose these options and as a result we will not see many foreclosures.
The 4 options before foreclosure are:
1️⃣ A Repayment Plan:
With this option homeowners will resume regular monthly mortgage payments and make a plan with their lender or servicer to pay back missed payments at their own rate and time.
2️⃣ A Payment Deferral Plan:
In this case, homeowners will resume regular monthly payments, deferring missed payments to the end of the loan. This deferral will be paid back when you sell or refinance your home.
3️⃣ A Loan Modification:
With a loan modification, servicers may change the terms of your loan. This could change the length, interest rate, principal payment or a combination to make the mortgage payments more affordable.
4️⃣ Sell Your Home:
Homeowners still in financial hardship may sell their house. In 2020 we saw home values in California increase over 20%. Many homeowners are sitting on a ton of equity and could hire a realtor, and in most cases receive multiple bids and sell their house for more than the asking price.
Overall, we do not think people are not going to be in a position where they will lose their homes. If anything, we will see a surge in inventory over the next 6 to 12 months, which would be a welcomed problem in the current housing market. If you or anyone you know is in a forbearance program and have any questions please feel free to reach out.
📈 Current Interest Rates Lastly, we want to touch on current mortgage rates. As we head into the end of the year, we have been talking about mortgage rates rising and they have. If anything changes you will be the first to know.
Thank you again for the support and continued referrals to myself and my team. As always, please feel free to reach out if you need anything. I hope you and your family are staying safe.