The housing market changed substantially in the wake of forbearance.
The forbearance program significantly impacted the housing market. During the pandemic, fears of economic uncertainty prompted the government to issue a forbearance on foreclosures, keeping nearly five million people in their homes. This additional security was critical at a time when homeowners were at significant risk of losing their homes.
The Mortgage Brokers Association (MBA) noted that most borrowers exiting forbearance are moving into either loan modification, payment deferral, or a combination of the two. With these options in place, four out of five homeowners who were in forbearance are exiting either paid in full or with a plan in place.
What does this mean for the housing market? Since so many people can stay in their homes and work out payment options, there won’t be a wave of foreclosures coming to the market. While there was a slight increase after the moratorium ended, we are still nowhere near the levels seen during the housing crash.
"Homeowners were at significant risk of losing their homes."
Forbearance wasn’t the only game changer. Lending standards have improved significantly since 2008, and that is helping to keep foreclosure filings low. This is because today’s borrowers are much more qualified to pay back their loans.
Even for those homeowners who are unable to pay or alter their loans through other programs, the amount of equity in their homes is allowing them to sell and avoid foreclosure altogether. Homeowners have options that they just did not have during the housing crisis. Thanks to their equity and the current undersupply of homes on the market, homeowners can sell their houses and move without having to enter the foreclosure process.
According to Moody’s Analytics, we won’t be seeing a crisis like what happened in 2008. There is so much equity available to current borrowers that, even in the event of an economic downturn, the majority of those homeowners will still be able to make their payments and meet their obligations.
The bottom line is that the forbearance program was a game-changer in the housing market. If you have any questions about this or real estate in general, don’t hesitate to reach out by phone or email. I would love to help you out.