As the economy continues to improve after a coronavirus-plagued 2020, the risk of home foreclosure for American families is lessening. In fact, the latest data from Black Knight, a mortgage technology and data provider, shows that mortgage delinquencies could hit pre-pandemic levels by the end of 2021.
Many feared a repeat of the 2008 economic recession after the COVID-19 pandemic hit, as stay-at-home orders were put into place, businesses closed and layoffs became common. The U.S. government issued a mandatory forbearance period – a period of time during which homeowners don’t have to make mortgage payments due to economic hardship – for all loans backed by Fannie Mae and Freddie Mac, which own the rights on about half of all U.S. mortgages. Following that example, many private mortgage servicing companies also put their own forbearance programs in place.
Homeowners struggling to make monthly payments can also refinance their home loan in today’s ultra-low interest rate environment, saving hundreds per month and thousands over the life of the loan. If you're interested in refinancing your home loan, you can explore your mortgage refinance options by visiting Credible to compare rates and lenders.
What to do if you can’t make your mortgage payments
A ruling from the Consumer Financial Protection Bureau (CFPB) banned most foreclosures for the remainder of 2021. As strong U.S. economic recovery continues, many experts expect foreclosures to rise heading into next year, but not at alarming levels. That’s because homeowners have several options this year that they didn’t have during the 2008 recession.
- Refinancing: One popular option over the past year has been to take advantage of historically low interest rates and refinance your mortgage. Homeowners who refinance could potentially save hundreds on their monthly payments. Many homeowners refinanced over the last year, but even as interest rates increase, Black Knight estimates another 14.5 million homeowners could still benefit from refinancing their home loan. If you’re thinking of refinancing, visit Credible to view loan options across multiple lenders.
- Sell your home: One of the greatest arguments against a foreclosure surge is rising home prices. Unlike the 2008 recession, home prices are much higher and most homeowners do not owe more on their home than what it’s worth. If homeowners can no longer keep up with their monthly payments, selling their home could be a good alternative and potentially profitable option.
- Talk to your servicer: Homeowners and mortgage servicers both lose when a home is forced into foreclosure, so instead of forgoing your payment, call your mortgage servicer – many will have options and will work with homeowners on alternative options.
What to expect on the foreclosure front post-pandemic
Mortgage delinquencies – or mortgages that are 30 days or more past due, including those in forbearance – dropped 7.11% in April to 4.66%, marking the first time delinquencies fell below 5% for the first time since the pandemic began. This means about 400,000 homeowners became current on their mortgages in April.
But this still leaves about 1.8 million homeowners in serious delinquency, or 90 days or more past due on their mortgage but still not in foreclosure, according to the Black Knight report. And the vast majority of those are in forbearance. As those federally regulated forbearance periods draw to an end this year, the third and fourth quarter will show a better picture of what's to come.
For those struggling with mortgage costs, refinancing could be a good option to lower your payment. You can use an online mortgage refinance calculator to determine new monthly costs.
As 2021 reaches its midway point, more homeowners continue to exit their forbearance periods. As homeowners start to make their payments once again, they have several options available to them if their incomes took a hit during the pandemic or if they are struggling to start making payments again.
Visit Credible to get in touch with experienced loan officers and get your mortgage questions answered.
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