Lydia Wietsma with Nexthome Elite Realty and I spent 15 minutes talking about mortgage forbearance, different options, what to plan for in the coming weeks and months.
The literal meaning of forbearance is “holding back”. It is a temporary postponement of mortgage payments resulting in a form of relief for the borrower in lieu of forcing a property into foreclosure. The borrower will have to pay the postponed payments back later. The terms of when and how depends on the details of the forbearance agreement accepted by both parties but one of the biggest benefits of this type of agreement is the lender delays its right to exercise foreclosure if the borrower can catch up to its payment schedule by a certain time. Loan owners, servicers and loan insurers may be willing to negotiate forbearance options because the losses generated by a foreclosure action typically fall on them.
Lydia works with a loan servicing company and she is getting more and more inspection requests. Not all will go into foreclosure but some will. She is seeing a consistent trickle coming in, no flood. All of these properties are maintained and well-kept; unlike 10 years ago when many properties were trashed before they went to foreclosure. Different mindset and attitude.
We will more likely see a trickle of foreclosures rather than a flood for several reasons. The housing recovery is a big reason. We have made up everything that was lost and then some.
Unemployment is high still, yes, but it is going down, putting more and more borrowers in a better place to make their payments.
Additionally, mortgages in forbearance are also decreasing. The most recent update from the Mortgage Bankers Association shows that we are down to roughly 3.5 million loans are in forbearance.
Foreclosures require two simultaneously occurring issues; economic distress and negative equity. The average American homeowner has $177,000 in equity and 90% of homeowners have at least 10% equity. We may sellers who need to sell but they will be regular sales versus foreclosures and short sales. (First American, KCM)
Sarah Perkins is an award winning account executive and has been in title sales since 2004. As the Director of Industry Research & Senior Account Executive, Sarah’s role is to bring real estate transactions to Navi Title. Sarah supports her clients by helping them navigate the ever-changing real estate space through thorough research and understanding of current trends impacting today’s home buyers and sellers.