Foreclosure surges 67% when Covid’s mortgage bailout expires

Foreclosure sign in front of the house in 2007.

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Foreclosures are beginning to skyrocket as government and private sector programs designed to help homeowners cope with the economic collapse of the Covid-19 pandemic are beginning to expire.

Mortgage lenders began the foreclosure process for 25,209 properties in the third quarter, up 32% from the second quarter. According to mortgage data firm Attom, it’s up 67% year-over-year from the third quarter of 2020.

The increase in foreclosures is dramatic, but deviates from the extreme lows created by the foreclosure program. There are typically about 40,000 new foreclosures per month, also known as the start. They fell from 3,000 to 4,000 in the first year of the pandemic when the tolerance program was fully implemented.

Government and private sector bailout programs have allowed financially challenged borrowers to delay their monthly payments by up to 18 months. Missed payments may be added at the end of the loan period or repaid when the home is sold or the mortgage is refinanced.

The states with the highest number of new foreclosures are:

  • California: 3,434
  • Texas: 2,827
  • Florida: 2,546
  • New York: 1,363
  • Illinois: 1,362

Rick Sharga, Executive Vice President of RealtyTrac, an ATTOM company, said:

Foreclosures in September were almost 70% lower than before the pandemic. The total foreclosure activity is also 60% lower than it was a year ago.

“Whether this increase is a precursor to a more serious problem or just returns to the normal level of foreclosure is one of the major debates in the industry today,” said Sharga.

Currently, many borrowers have completed the tolerance program. The biggest weekly decline so far came last week. According to mortgage data and analytics firm Black Knight, the number of bailout program borrowers fell by 11% weekly.

Driven by a decline in FHA / VA loan 84,000 plans, the number of active tolerance plans fell by 177,000. As of October 5, approximately 1.4 million borrowers remained in pandemic-related tolerance plans, or 2.6% of all active mortgages.

The majority of the people who came out of the plan are again up to date on their payments. Some people who are not currently paying are working with the lender to change the loan. Those who do not contact the lender or cannot afford to pay yet sell the house or go into foreclosure.

The number of foreclosures should remain relatively low due to aggressive changes by creditors and due to the recent housing boom and the resulting high housing fairness. According to CoreLogic, prices in August were up more than 18% year-on-year.

“I think the’cliff of tolerance’will be minimized,” said David Stevens, a former chief executive officer of the Mortgage Banking Association and a former FHA commissioner of the Obama administration.

“Unlike the Great Recession, where house prices fell by about 20% from peak to trough, house prices rose by about the same amount in this recession, so there should be some foreclosure, but much less than a percentage basis. May be because of the ability to sell a home compared to the default, or to stay in a home for much better training options and higher reemployment. ”

According to Sharga, the number of foreclosures will continue to increase until the end of this year and may return to normal levels by the middle of next year.

“Then they may be a little higher than usual, but they are still plateaus much lower than the types of tsunamis we saw during the Great Recession by the end of next year,” he added.

Foreclosure surges 67% when Covid’s mortgage bailout expires

Source link Foreclosure surges 67% when Covid’s mortgage bailout expires

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