New Mexico has a contemporary housing development.
Hundreds of thousands of homeowners could lose their homes as the Covid-related mortgage rescue programs end.
The federal government, big banks and mortgage servicers started emergency programs when the Pandemic hit last year. Millions of homeowners missed payments because of the rescue.
Black Knight vice president of market research said that three-quarters of a million homeowners have left their plans over the past 60 days.
The programs were successful.
Black Knight, a mortgage software, data and analytics company, says that over half of the 7.7 million borrowers who piled into the programs are current on their loans. Some borrowers have either sold their homes or refinanced their loans to make them more affordable. Over half a million people are still trying to work out a loan modification plan, but they are in active loss mitigation with their lender.
Hundreds of thousands of homeowners are in a tough spot. Approximately 264,000 homeowners are delinquent on their mortgages after their programs expired, and 38,000 are in active foreclosure.
People are nervous right now. A lot of them are coming off forbearances, some of them are not working and not knowing what to do. Margherita Diaz, a HUD certified counselor at the Putnam County Housing Corporation, told them to first contact the servicer or the lender to find out what their options are.
There are not many options for borrowers who lost a lot of income during the Pandemic. Some borrowers can't pay, so servicers have been offering loan modifications and lower interest rates. Some borrowers can't afford the increase in taxes and insurance that servicers advanced to them during their forbearance period, and that can be spread over a year of payments.
There are services that are willing to help. It wasn't their fault that Covid happened, so they are relying more on the borrower to fend for themselves.
Selling is another option. Home prices are up nearly 20% from a year ago, thanks to a huge run on housing during the Pandemic.
According to an analysis by RealtyTrac, a foreclosure listing site based on data from ATTOM, about 85% of homeowners currently in foreclosure have positive equity. The borrowers owe less on their loans than their homes are worth. The 264,000 who are delinquent but not yet in foreclosure have significant equity as well.
When the last housing market boom and bust happened, about one third of homeowners were underwater on their loans.
The housing market has seen record low inventory for more than a year. Due to labor and supply-chain issues, builders have not been able to ramp up production. The market needs about a million more homes. These homes would not fill that completely, but they would make a difference.
More than 70% of borrowers in foreclosures have more than 20% equity.
People wait to visit a house for sale in Garden City, New York.
Having equity didn't prevent them from default on their loans, but it should give them the opportunity to sell their home at a profit, satisfy their debt to the lender, and have money left over to give them a chance for a fresh start.
So far, that has not been the case. Black Knight found that a third of borrowers who start the foreclosure process with at least 40% equity in their homes go to foreclosure anyway.
The number of post-forbearance loans in active foreclosure has not changed over the last 90 days as servicers continue to forgo foreclosure actions in favor of other loss mitigation options. A pocket of foreclosure risk will persist throughout much of the first half of the year, as we shouldn't be lulled into a false sense of security.
It might seem like the better option for homeowners to simply put their homes on the market, especially given the fierce demand and short supply, but that is not always the case.
It is a matter of where they are going. Where are they going? Where are they going to buy something? The market is high right now to purchase and to rent, that is a big problem.
