{"id":1206,"date":"2020-10-21T15:52:32","date_gmt":"2020-10-21T15:52:32","guid":{"rendered":"https:\/\/phphouses.com\/blog\/?p=1206"},"modified":"2021-02-03T16:35:51","modified_gmt":"2021-02-03T16:35:51","slug":"todays-options-will-save-homeowners-foreclosure","status":"publish","type":"post","link":"https:\/\/phphouses.com\/blog\/todays-options-will-save-homeowners-foreclosure\/","title":{"rendered":"Why Today\u2019s Options Will Save Homeowners from Foreclosure"},"content":{"rendered":"
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Why Today\u2019s Options Will Save Homeowners from Foreclosure<\/p><\/div>\n

Many housing experts originally voiced concern that the mortgage forbearance program (which allows families impacted financially by COVID to delay mortgage payments to a later date) could lead to an increase in foreclosures when forbearances end.<\/p>\n

Some originally forecasted that up to 30% of homeowners would choose to enter\u00a0forbearance<\/a>. Less than 10% actually did, and that percentage has been dropping steadily.\u00a0Black Knight<\/em>\u00a0recently\u00a0reported<\/a>\u00a0that the national forbearance rate has decreased to 5.6%, with active forbearances falling below 3 million for the first time since mid-April.<\/p>\n

Many of those still in forbearance are actually making timely payments. Christopher Maloney of\u00a0Bloomberg Wealth<\/em>\u00a0recently\u00a0explained<\/a>:<\/p>\n

\u201cAlmost one quarter of all homeowners who have demanded forbearance are still current on their mortgages\u2026according to the latest MBA data.\u201d<\/em><\/p><\/blockquote>\n

However, since over two million homeowners are still in forbearance, some experts are concerned that this might lead to another wave of foreclosures like we saw a little over a decade ago during the Great Recession. Here is why this time is different.<\/p>\n

There Will Be Very Few Strategic Defaults<\/strong><\/h4>\n

During the housing crash twelve years ago, many homeowners owned a house that was worth less than the mortgage they had on that home (called\u00a0negative equity<\/em>\u00a0or\u00a0being underwater<\/em>). Many decided they would just stop making their payments and walk away from the house, which then resulted in the bank foreclosing on the property. These foreclosures were known as\u00a0strategic defaults<\/em>. Today, the vast majority of homeowners have\u00a0significant<\/a>\u00a0equity in their homes. This dramatically decreases the possibility of strategic defaults.<\/p>\n

Aspen Grove Solutions<\/em>, a business consulting firm, recently addressed the issue in a study titled\u00a0Creating Positive Forbearance Outcomes<\/a><\/em>:<\/p>\n

\u201cUnlike in 2008, strategic defaults have not emerged as a serious problem and seems unlikely to emerge given stronger expectations for property price increases, a record low inventory of homes, and stable residential underwriting standards leading up to the crisis which has reduced the number of owners who are underwater.\u201d<\/em><\/p><\/blockquote>\n

There Are Other Options That Were Not Available the Last Time<\/strong><\/h4>\n

A decade ago, there wasn\u2019t a forbearance option, and most banks did not put in other programs, like modifications and short sales, until very late in the crisis.<\/p>\n

Today, homeowners have several options because banks understand the three fundamental differences in today\u2019s real estate market as compared to 2008:<\/p>\n

1. Most homeowners have\u00a0substantial equity<\/strong>\u00a0in their homes.<\/p>\n

2. The real estate market has a\u00a0shortage of listings for sale<\/strong>. In 2008, homes for sale flooded the market.<\/p>\n

3.\u00a0Prices are appreciating<\/strong>. In 2008, prices were depreciating dramatically.<\/p>\n

These differences allow banks to feel comfortable giving options to homeowners when exiting forbearance.\u00a0Aspen Grove<\/em>\u00a0broke down some of these options in the study mentioned above:<\/p>\n