Real Estate

You Can Help! How To Support Homeowners In Forbearance

Real estate is cyclical, with downturns occurring about every 10 years. If you think the incredibly low inventory and the high demand will prevent a foreclosure crisis, think again.

The current factors in play are capable of triggering a tsunami of foreclosures. If that occurs, what can you do to help distressed property owners navigate their personal foreclosure crisis? 

I’ve seen four major real estate downturns over the course of my real estate career. During the early 1990s downturn, the Los Angeles market was so strong, it seemed immune to the foreclosure crisis happening elsewhere in the country. When the market did finally turn, values dropped a whopping 30 percent in only six months. It’s possible a similar situation could be brewing in 2021.

Is the ‘perfect storm’ looming on the horizon?

While each factor below will probably result in an increase in foreclosures, taken together, they could result in a perfect storm leading to a major downturn in prices. Key factors to watch include: 

1. No money in the bank

According to CNBC, 63 percent of Americans say they have been living paycheck to paycheck since the COVID-19 pandemic began in early 2020. Fifty-three percent of those were not living paycheck to paycheck prior to the pandemic. 

Even with the stimulus payments, enhanced unemployment benefits and small business loans, 47 percent of those surveyed in Highland Solutions’ survey “said their emergency savings have run out.” If faced with a $500 emergency, 8 out of 10 would be unable to cover the cost. Forty-two percent report they have taken on more debt than normal. 

2. Mortgage forbearance programs end

Millions of homeowners have applied for forbearance. As these programs expire in 2021, many may face foreclosure due to the ongoing lockdowns, loss of a job or business or other financial issues. 

3. Termination of COVID-19 financial relief programs mean less money in consumer pockets

A substantial part of the population is facing a significant drop in their take-home pay due to a number of COVID-19 programs terminating in January of 2021. Here are four of the most important ones that are ending:

  • Extended unemployment benefits end this month for both employees and for businesses that relied on these benefits to keep their workers on the job during the last year. 
  • Payroll tax deferral for federal employees, the military and many other government jobs.
  • Forbearance programs for student loans.
  • Money to help gig workers, including real estate professionals.

4. The group no one talks about — residential investors

Millions of Americans own homes and rental properties as investments. Due to the eviction moratoriums in many areas, these owners have gone without income for many months and may continue to do so in 2021.

Under normal circumstances, they could easily sell these properties, but how saleable is their property when the tenant isn’t paying rent and can’t be evicted? 

5. Prices are already falling 

The COVID-19 pandemic has resulted in an exodus from downtown metropolitan areas. According to CoreLogic, almost a third of metropolitan areas are at “high risk” of price declines during the next 12 months, even as overall prices nationally continue to rise. 

6. Raised taxes and massive spending increases ahead

According to Statista, the U.S. ended 2019 with a national debt of $23.2 trillion. At the end of 2020, that debt had ballooned by $4.54 trillion to $27.75 trillion.

The Biden Administration is already planning a $1.9 trillion spending package. Moreover, the Democratic leadership in Congress has indicated it will tackle a tax increase later in 2021. As MarketWatch mentioned

“Major proposals by the Biden campaign would raise taxes from $1.6 trillion to $1.9 trillion over a decade from corporations, $1 trillion to $1.2 trillion from high earners through the income tax, and $800 billion to $1 trillion from Social Security payroll taxes on high-wage earners. Biden also supports a fee on banks, which we believe will raise $100 billion, tax credits for renters and first-time homebuyers that we estimate will cost $300 billion, and an increase of the Child and Dependent Care Tax Credit, which we estimate will cost $100 billion.”

The cumulative effect

The upshot of all of this is twofold. High national debt historically drives up inflation, which means higher prices coupled with less purchasing power. The same is true for tax increases — consumers have less buying power.

Coupled with the continuing lockdowns, this translates into millions of individuals having less money to spend. These factors could hit both homeowners as well as struggling businesses hard, pushing many into a situation where they can no longer make ends meet.

Common reactions of distressed property owners 

Based on how distressed homeowners have responded during previous downturns, here’s what they’re most likely to do: 

  • Try to sell their property without an agent.
  • Stay in the property as long as possible during foreclosure to pick up “free rent.” This approach ruins their credit.
  • Attempt to sell using a short sale.
  • Give keys back to the lender (i.e., “deed in lieu of foreclosure.”) 
  • Declare bankruptcy to delay foreclosure.

How agents can support homeowners who are currently in forbearance

Many people believe that if they’re currently enrolled in a 180-day forbearance program, they are responsible for resuming normal payments at that date. Once the 180 days expire, however, they’re entitled to request another 180 days — bringing the total to 360 days of deferred payment eligibility. Share this information in both your print and online marketing campaigns. As Fannie Mae advises

“If you receive a forbearance plan, you have options when comes to repaying the missed amount. You don’t have to pay the forbearance amount all at once unless you are able to do so.”

What’s more, here’s where you can find additional resources on how you can help property owners avoid foreclosure. 

For distressed homeowners not in a forbearance program

If a distressed homeowner has not utilized a forbearance program, here are some additional options you can use in your print and digital marketing campaigns

  • Have the homeowner contact their lender about entering a forbearance program due to COVID-19.
  • For homeowners with interest rates at 4 percent of more, consider refinancing or asking their lender for a loan modification at a lower interest rate. (This assumes they are current on their payments). 
  • Free up part of their equity by working with an equity sharing company. Four programs worth considering include:,, and 
  • Rent their home and move to a less expensive rental until their financial situation improves. 
  • If they owe more than the property’s value, hire a loss mitigation firm to negotiate a short sale. 
  • For additional ideas, review the list of HUD-sponsored programs to help distressed homeowners avoid foreclosure.

Helping troubled small investors

There are two potential workarounds available. In the case where investors own one to four units, and they owner-occupy one unit, they should check with their lender to see if they are eligible for a forbearance program. When it comes to financing, one- to four-unit properties are normally treated the same as single-family residences.

Second, depending on if rent control provisions are in place and what those laws allow, a buyer who intends to owner-occupy a single-family residence of one unit in a two- to four-unit property may be able to legally evict the current tenant once they close.

You can help

There’s much you can do to assist distressed homeowners avoid foreclosure. When you help someone stay in their home, the impact on their family is profound. Not only will you have their lasting gratitude, chances are, they will also refer others to you in the future. 

Bernice Ross, President and CEO of BrokerageUP and, is a national speaker, author and trainer with over 1,000 published articles. Learn about her broker/manager training programs designed for women, by women, at and her new agent sales training at

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