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Home Foreclosures Up Sharply from “Extreme Lows”
With both government and private-sector protections enacted at the height of the pandemic now expiring, residential foreclosures have begun to surge. Relatively speaking.
CNBC reported that mortgage lenders began the foreclosure process on 25,209 properties in the third quarter, a 32% increase from Q2. On a year-over-year basis, that’s a 67% increase, according to ATTOM. Leading the way were California with 3,434 new foreclosures, Texas with 2,827 and Florida with 2.546.
“While the increases in foreclosures are dramatic, they are coming off extreme lows that were created by the forbearance programs,” reported CNBC. “New foreclosures, also known as starts, usually number around 40,000 per month. They fell to as low as 3,000 to 4,000 in the first year of the pandemic, when forbearance programs were in full force.”
Government and private-sector relief programs allowed borrowers with financial difficulties to delay their monthly payments for up to 18 months. The missed payments could then be tacked on to the end of the loan period, or repaid when the home was sold or the mortgage refinanced.
“Despite the increased level of foreclosure activity in September, we’re still far below historically normal numbers,” said Rick Sharga, EVP at RealtyTrac, an ATTOM company.
The majority of those coming out of the plans have once again become current on their payments, according to CNBC. Some who aren’t current on their payments are working with lenders on loan modifications. Those who didn’t contact their lenders or who still can’t afford any payments are either selling their homes or going into foreclosure.
CNBC reported that the foreclosure numbers should stay relatively low because of aggressive modifications by lenders, and also because of high levels of home equity currently, due to the recent housing boom and consequently high home prices. Prices were up over 18% year over year in August, according to CoreLogic.
“I think the ‘forbearance cliff’ will be minimal,” said David Stevens, former CEO of the Mortgage Bankers Association and former FHA commissioner in the Obama administration.
He continued, “Unlike the Great Recession where home prices dropped approximately 20% from peak to trough, this recession saw home values rise by roughly the same amount. So while we should see some foreclosures, the likelihood is that there will be far fewer from a percentage basis due to the ability to sell a home versus default, or stay in the home due to far better workout options and higher re-employment.”
- ◦Economy
