top of page

What Happens When Homeowners Leave Their Forbearance Plans?

  • Writer: Andreas Kramer
    Andreas Kramer
  • Jan 27, 2021
  • 2 min read

According to the latest report from Black Knight, Inc., a well-respected provider of data and analytics for mortgage companies, 6.48 million households have entered a forbearance plan as a result of financial concerns brought on by the COVID-19 pandemic. Here’s where these homeowners stand right now:

  • 2,543,000 (39%) are current on their payments and have left the program

  • 625,000 (9%) have paid off their mortgages

  • 434,000 (7%) have negotiated a repayment plan and have left the program

  • 2,254,000 (35%) have extended their original forbearance plan

  • 512,000 (8%) are still in their original forbearance plan

  • 116,000 (2%) have left the program and are still behind on payments

This shows that of the almost 3.72 million homeowners who have left the program, only 116,000 (2%) exited while they were still behind on their payments. There are still 2.77 million borrowers in a forbearance program. No one knows for sure how many of those will become foreclosures. There are, however, three major reasons why most experts believe there will not be a tsunami of foreclosures as we saw during the housing crash over a decade ago:

  1. Almost 30% of borrowers in forbearance are still current on their mortgage payments.

  2. Banks likely don’t want to repeat the mistakes of 2008-2012 when they put large numbers of foreclosures on their books. This time, many will instead negotiate a modification plan with the borrower, which will enable households to maintain ownership of the home.

  3. With the significant equity homeowners have today, many will be able to sell instead of going into foreclosure.

Will there be foreclosures coming to the market? Yes. There are hundreds of thousands of foreclosures in this country each year. People experience economic hardships, and in some cases, are not able to meet their mortgage obligations.

Here’s the breakdown of new foreclosures over the last three years, prior to the pandemic:

  • 2017: 314,220

  • 2018: 279,040

  • 2019: 277,520

Through the first three quarters of 2020 (the latest data available), there were only 114,780 new foreclosures. If 10% of those currently in forbearance go to foreclosure, 275,000 foreclosures would be added to the market in 2021. That would be an average year as the numbers above show.

What happens if the number is more than 10%?

If we do experience a higher foreclosure rate from those in forbearance, most experts believe the current housing market will easily absorb the excess inventory. We entered 2020 with 1,210,000 single-family homes available for purchase. At the time, that was low and problematic. The market was experiencing high buyer demand, and we needed more houses to meet that demand. We’re now entering 2021 with 320,000 fewer homes for sale, while buyer demand remains extremely strong. This means the housing market has the capacity to soak up a lot of inventory.

Bottom Line

There will be more foreclosures entering the market later this year, especially compared to the record-low numbers in 2020. However, the market will be able to handle the increase as buyer demand remains strong.

Comments


Contact

PLEASE CALL OR EMAIL ME:

united-kingdom-flag-large.png
germany-flag-large.png
spain-flag-large.png

Email: andy@kramer.net

Tel: (310) 402-2940

  • White Facebook Icon
  • White Instagram Icon
  • White LinkedIn Icon
  • White Twitter Icon
  • White YouTube Icon

LOCATIONS:

12001 Ventura Pl, Suite 100

Studio City, CA 91604

Tel: (310) 402-2940

9454 Wilshire Blvd, Suite 400

Beverly Hills, CA 90212

Tel: (310) 402-2940

23914 Summerhill Ln

Valencia, CA 91354

Tel: (661) 877-0323

ALTERNATIVELY YOU CAN FILL IN THE FOLLOWING CONTACT FORM:

Thanks for submitting!

Compass is a real estate broker licensed by the State of California and abides by Equal Housing Opportunity laws. License Number 01991628. All material presented herein is intended for informational purposes only and is compiled from sources deemed reliable but has not been verified. Changes in price, condition, sale or withdrawal may be made without notice. No statement is made as to the accuracy of any description. All measurements and square footage are approximate. If your property is currently listed for sale this is not a solicitation.

© 2020 Andreas Kramer  |  Created by LA Web Design

bottom of page