Though for some the current landscape might feel reminiscent of the 2008 housing crisis, there’s a lot that’s different today. Here’s how you can best serve your clients during this time.
A question we’ve been asked in 2021 is — will we face a foreclosure crisis when the forbearance mortgage relief options come to an end? If you remember the housing crisis that began in 2008, you might be feeling like you’re revisiting a familiar scene.
However familiar it may feel, plans have been put in place within the forbearance regulations to ensure history doesn’t repeat itself. Read ahead to learn how you can best serve your clients.
First and foremost, homeowners this time around are able to request 180 days of mortgage relief through forbearance. Once those first 180 days expire, they’re entitled to request 180 additional days, bringing the total to 360 days of deferred payment eligibility.
For agents, it would be wise to speak with your clients who are potentially in forbearance. Advise them to stay in contact with lenders to help create a plan for the deferred payments as a step toward avoiding foreclosure.
Some homeowners who are in the forbearance program are concerned they’ll have to pay their deferred payments back in a lump sum at the end of forbearance. Fortunately, you can remind them that’s not the case. As Fannie Mae explains:
“You don’t have to repay the forbearance amount all at once upon completion of your forbearance plan […] Here’s the important thing to remember: If you receive a forbearance plan, you will have options when it comes to repaying the missed amount. You don’t have to pay the forbearance amount at once unless you are able to do so.”
Agents and lenders can identify programs and aid designed to help meet loan obligations. Acting quickly may help homeowners stay in their homes and keep the money they have already invested into it. Unfortunately, at times like these, scam activity increases, so you can also try to help homeowners who must remain vigilant and watch out for offers that sound too good to be true.
Agents have an opportunity here to help people achieve their dreams of homeownership and protect their investment by sharing information on available government and financial resources to ensure their clients can afford to stay in their homes.
Fewer than thought
Another noteworthy fact is that the number of homeowners in the forbearance program has been decreasing. Fewer people than initially expected are still in forbearance, so the number of owners who will need to work out alternative payment options is declining.
This means there are fewer and fewer homeowners at risk of foreclosure, and many who initially applied for forbearance didn’t end up needing it. Mike Fratantoni, senior vice president and chief economist at the Mortgage Bankers Association (MBA), explains:
“Nearly two-thirds of borrowers who exited forbearance remained current on their payments, repaid their forborne payments, or moved into a payment deferral plan. All of these borrowers have been able to resume – or continue – their pre-pandemic monthly payments.”
For those who are still in forbearance and unable to make their payments, foreclosure isn’t the only option left. In its Homeowner Equity Insights Report, CoreLogic indicates:
“In the second quarter of 2020, the average homeowner gained approximately $9,800 in equity during the past year.”
Other good news for agents to remind their clients is that, if they qualify, many homeowners have enough equity in their homes today to be able to sell their houses instead of foreclosing. Selling and protecting the overall financial investment may be a solid option for many homeowners. As Ivy Zelman, founder of Zelman & Associates, mentioned in a recent podcast:
“The likelihood of us having a foreclosure crisis again is about zero percent.”
The bottom line
Depending on the state of your local real estate market, it may not be in your clients’ best interest to sell their home right now. Before helping clients put their home on the market, advise them to talk to their mortgage lender.
Foreclosures can be quite expensive for lenders, so they may be open to a loan modification or might refinance a mortgage loan, which would lower the amount of your clients’ monthly mortgage payment and allow them to stay in place.
However, if your clients’ income has drastically changed, due to job loss or other reasons, a renegotiated mortgage loan or loss mitigation agreement may not be sufficient to keep them in their home.
In that case, talking to the lender is still advisable. Having a trusted and knowledgeable professional to recommend to guide your client is essential in this process and might be the driving factor that helps them stay in their home.