Will foreclosures explode in 2021?
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Given the number of Americans who experienced financial difficulties during the Coronavirus pandemicYou would think that foreclosure figures would be booming. But in reality, according to news household debt research By The Ascent, foreclosure rates are going down this year. While there were around 50,000 foreclosures in November 2019, there were only 10,000 in September 2020. But things could change very unfavorably in 2021.
Why foreclosure activity could explode in the coming year
Right now, there is a moratorium on foreclosures and evictions that is set to expire in January 2021. And while it can be extended, it’s not guaranteed. Once this protection is exhausted, owners whose mortgage lenders were already continuing the lockdown before the pandemic had a chance to pick up where they left off.
Right now, a lot of homeowners are getting a stay on their mortgages. A provision of the CARES Act, the coronavirus relief bill promulgated in late March, provided that borrowers were entitled to a maximum of 360 days of mortgage forbearance, during which they could pause their payments. But once the forbearance runs out, borrowers will need to start making up for their missed payments and repaying their regular payments. And that could prove problematic for some people, namely those whose finances are in bad shape due to the pandemic.
That said, if a second relief bill passes, it may include provisions for distressed homeowners that are comparable to what the CARES Act allowed, so borrowers with outstanding mortgages do not have to lose. hope. There is also a good chance that mortgage lenders will try to work with borrowers to avoid a widespread foreclosure crisis.
In addition, some borrowers may have the option of refinance their mortgages and drastically lower their monthly payments in the process, keeping the pace up. And for those who simply can’t afford to buy their home, selling before it’s foreclosed can be easier than it once was. Often times, foreclosure occurs when a homeowner cannot pay a mortgage but also cannot sell a house for enough money to pay off that loan in full. But home values have skyrocketed during the pandemic, so borrowers who need to unload their homes may be able to sell with relative ease, especially since the low mortgage rates are currently contributing to an incredibly high demand from buyers.
All in all, we could see an increase in foreclosures in 2021, but if relief measures are extended, that may not happen. Borrowers with delinquent mortgages should maintain open lines of communication with their lenders if they are concerned that they will not be able to meet their monthly payments after this assistance ends. One thing to remember is that lenders don’t appreciate the foreclosure process – it’s a burden on them too. Lenders much prefer to be paid monthly, and some may work with borrowers to make this happen in one form or another, be it a refinance or a loan modification. And if enough homeowners are able to weather the pandemic and its aftermath, we may be able to avoid a widespread foreclosure crisis after all.