Forbearance Program?

Many industry experts predicted that the housing market would crash when the pandemic struck in 2020. They worried that the loss of jobs and the current state of the economy would cause a wave of foreclosures akin to the one that occurred after the housing bubble burst over ten years ago. Thank goodness the forbearance program made that different. In order to prevent another foreclosure crisis, it gave homeowners much-needed relief. Here is how forbearance succeeded.

When having a home's security and protection was more crucial than ever, forbearance helped nearly five million homeowners get back on their feet. Those who were in need were able to work with their banks and lenders to avoid foreclosure and stay in their homes. Mortgage Bankers Association (MBA) Vice President of Industry Analysis Marina Walsh observes:

“Most borrowers exiting forbearance are moving into either a loan modification, payment deferral, or a combination of the two workout options.”

With modification, deferral, and workout options available, as shown in the graph below, four out of every five homeowners in forbearance are either fully paid off or are leaving with a plan. They can continue to reside in their houses.

What does this mean for the housing market?

There won't be a flood of foreclosed homes hitting the market because so many people can stay in their homes and find other housing options. Furthermore, despite marginally increasing since the foreclosure moratorium was lifted this year, current foreclosure rates are still far below those observed during the housing crisis.

The game didn't just change with forbearance, though. Another factor pre

Many industry experts predicted that the housing market would crash when the pandemic struck in 2020. They worried that the loss of jobs and the current state of the economy would cause a wave of foreclosures akin to the one that occurred after the housing bubble burst over ten years ago. Thank goodness the forbearance program made that different. In order to prevent another foreclosure crisis, it gave homeowners much-needed relief. Here is how forbearance succeeded.

When having a home's security and protection was more crucial than ever, forbearance helped nearly five million homeowners get back on their feet. Those who were in need were able to work with their banks and lenders to avoid foreclosure and stay in their homes. Mortgage Bankers Association (MBA) Vice President of Industry Analysis Marina Walsh observes:

“Most borrowers exiting forbearance are moving into either a loan modification, payment deferral, or a combination of the two workout options.”

With modification, deferral, and workout options available, as shown in the graph below, four out of every five homeowners in forbearance are either fully paid off or are leaving with a plan. They can continue to reside in their houses.

What does this mean for the housing market?

There won't be a flood of foreclosed homes hitting the market because so many people can stay in their homes and find other housing options. Furthermore, despite marginally increasing since the foreclosure moratorium was lifted this year, current foreclosure rates are still far below those observed during the housing crisis.

The game didn't just change with forbearance, though. Another factor preventing more foreclosure filings is the fact that lending standards have significantly improved since the collapse of the housing bubble. The borrowers of today are much better able to repay their mortgages.

And while the majority of homeowners are exiting the forbearance program with a plan, those who still need to make a change due to financial hardship or other difficulties have the opportunity to sell their homes today due to the record-high level of equity, allowing them to completely avoid foreclosure. The housing crisis, when so many people owed more on their mortgages than their homes were worth, gave rise to a lack of options for homeowners. Homeowners can sell their properties, move, and avoid going through the foreclosure process that caused the 2008 housing market crash thanks to their equity and the current lack of available housing on the market.

Thomas LaSalvia, Chief Economist with Moody’s Analytics, states:

"There’s some excess savings out there, over 2 trillion worth. . . . There are people that have ownership of those homes right now, that even in a downturn, they’d still likely be able to pay that mortgage and won’t have to hand over keys. And there won’t be a lot of those distressed sales that happened in the 2008 crisis.”

For homeowners in need, the forbearance program was a game changer. It's one of the main reasons why a flood of foreclosed properties won't hit the market.

venting more foreclosure filings is the fact that lending standards have significantly improved since the collapse of the housing bubble. The borrowers of today are much better able to repay their mortgages.

And while the majority of homeowners are exiting the forbearance program with a plan, those who still need to make a change due to financial hardship or other difficulties have the opportunity to sell their homes today due to the record-high level of equity, allowing them to completely avoid foreclosure. The housing crisis, when so many people owed more on their mortgages than their homes were worth, gave rise to a lack of options for homeowners. Homeowners can sell their properties, move, and avoid going through the foreclosure process that caused the 2008 housing market crash thanks to their equity and the current lack of available housing on the market.

Thomas LaSalvia, Chief Economist with Moody’s Analytics, states:

"There’s some excess savings out there, over 2 trillion worth. . . . There are people that have ownership of those homes right now, that even in a downturn, they’d still likely be able to pay that mortgage and won’t have to hand over keys. And there won’t be a lot of those distressed sales that happened in the 2008 crisis.”

For homeowners in need, the forbearance program was a game changer. It's one of the main reasons why a flood of foreclosed properties won't hit the market.