Here’s some important info to close the door on recent foreclosure fears.
As you may have heard, some people are predicting that the fall and winter will bear a glut of foreclosures across the country. It’s obviously been a really rough year for many Americans; people have taken severe financial hits and lost their jobs. However, there are two reasons why this dreaded wave of foreclosures isn’t about to come crashing down anytime soon.
Early on in the pandemic, the government basically permitted homeowners to request a forbearance on their loans or avail themselves of some other avenue of relief, and many folks did run to their banks to seek leeway. While we can’t legally recommend forbearance, we can notify you that it is one of the options at your disposal if you’ve been rocked by financial hardship
Right now, there’s a fear that these homeowners who have been granted forbearance won’t be able to afford their back payments, and it will lead to widespread foreclosures. This fear, however, stems from our ideas and experiences from the 2008 financial crisis when foreclosures were rampant, but it’s important to note that there wasn’t an equity position in the market back then. When market values fell, it created instant negative equity, making the situation especially dire.
In today’s market, 77% of all forbearances have at least a 20% equity position. On top of that, prices are very strong, so altogether we’re not really worried about a glut of foreclosures. Again, widespread foreclosures usually only occur in the market whenever people have little to no room on their equity to hang on to a property. If a homeowner has equity to work with, they’ll do what they have to do to hold on to their property. Banks are also doing their best to work with homeowners to avoid such a scenario.
I hope this message helped alleviate some of your concerns about a flood of foreclosures swallowing our market. Please rest assured that we’re not seeing anything indicative of the awful trend we endured in 2008 through 2012. If you have any questions about this or any other real estate-related topic, feel free to reach out to me via phone or email. I’d love to speak with you about your real estate needs or point you to some great resources!