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Will COVID Forbearances Cause Home Values to Plummet?

Will Forbearance Plans Lead to a Tsunami of Foreclosures? | MyKCM

At the onset of the economic disruptions caused by the COVID pandemic, the government quickly put into place forbearance plans to allow homeowners to remain in their homes without making their monthly mortgage payments. Today, almost three million households are actively in a forbearance plan. Though 29.4% of those in forbearance have continued to stay current on their payments, many have not.

Yanling Mayer, Principal Economist at CoreLogic, recently revealed:  

"A distributional analysis of forborne loans’ payment status reveals that more than one third (39.1%) of all forborne loans are now 150+ days behind payment, while as many as 1-in-4 (25.5%) are 180+ days past due.”

These homeowners have been given permission to not make their payments, but the question now is: how many of them will be able to catch up after their forbearance program ends? There’s speculation that a forthcoming wave of foreclosures could be the result, and that could lead to another crash in home values like we saw a decade ago.

However, today’s situation is different than the 2006-2008 housing crisis as many homeowners have tremendous amounts of equity in their homes.

What are the experts saying?

Over the last 30 days, several industry experts have weighed in on this subject.

Michael Sklarz, President at Collateral Analytics:

“We may very well see a meaningful increase in the number of homes listed for sale as these borrowers choose to sell at what is arguably an intermediate top in the market and downsize to more affordable homes rather than face foreclosure.”

Odeta Kushi, Deputy Chief Economist at First American:

“The foreclosure process is based on two steps. First, the homeowner suffers an adverse economic shock…leading to the homeowner becoming delinquent on their mortgage. However, delinquency by itself is not enough to send a mortgage into foreclosure. With enough equity, a homeowner has the option of selling their home, or tapping into their equity through a refinance, to help weather the economic shock. It is a lack of sufficient equity, the second component of the dual trigger, that causes a serious delinquency to become

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Relief for Homeowners Affected by Coronavirus

I hope you're staying hydrated, well-rested, and you're exercising moderately every day!  Whew.  It's a tall order, but it's good work.  

Thought you might like to know of some resources available to you if you have the need. If I've omitted any resources that you know of, feel free to get in touch w me and I'll pass along the info.  (Extra points for you if you call me:  I'm contact-starved, and I'd love to hear your voice!)

The Federal Housing Financing Agency (FHFA) and Housing and Urban Development (HUD) have announced a moratorium on foreclosures and evictions for at least the next 60 days.   Here's a link: https://www.hud.gov/press/press_releases_media_advisories/HUD_No_20_042 .  Homeowners who are struggling financially as a result of coronavirus may postpone their mortgage payments for up to 12 months. Fannie Mae and Freddie Mac and their servicers have been instructed to be proactive in providing assistance to homeowners and to provide forbearance on their loans.  Mortgage payments will be paused with no impact to credit.   Here are some links to Fannie Mae and Freddie Mac assistance sites:   https://www.knowyouroptions.com/covid19assistance  and https://myhome.freddiemac.com/mortgage-help/contact.html 

Additionally banks have posted their own policies and ways for consumers to contact them directly for assistance.  Here's more info:  

Bank of America:  https://about.bankofamerica.com/promo/assistance/latest-updates-from-bank-of-america-coronavirus; Capital One:  https://www.capitalone.com/coronavirus/; Chase Bank:  https://www.chase.com/digital/resources/coronavirus; Truist Bank:  https://www.truist.com/coronavirus-response/banking-solutions; US Bank:  https://www.usbank.com/splash/covid-19.html; Wells Fargo: https://newsroom.wf.com/press-release/corporate-and-financial/wells-fargo-announces-aid-customers-and-communities-impacted; Mr. Cooper (mortgage servicer): https://www.mrcooper.com/blog/2020/03/20/coronavirus/ and Flagstar (mortgage servicer):  https://www.flagstar.com/promo/update.html.

The Consumer Financial Protection Bureau (CFPB) is urging consumers to protect their credit during this time.   https://www.consumerfinance.gov/about-us/blog/protecting-your-credit-during-coronavirus-pandemic/.  This site is a good source of info:  they have a number of resources focused on short-term and long-term financial protection -- for instance how to manage bill-paying in the near future, how to manage student loans, and how to negotiate debt collections.

For the latest updates and public health policies, here's a link to the Centers for Disease Control's COVID-19 site:  https://www.cdc.gov/coronavirus/2019-ncov/index.html?CDC_AA_refVal=https%3A%2F%2Fwww.cdc.gov%2Fcoronavirus%2Findex.html.  And you might also be interested in checking in to the EPA's website concerning coronavirus.  The Good News is at the current time they haven't found the

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