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[Best of 2021] 4 Reasons Why the End of Forbearance Will Not Lead to a Wave of Foreclosures
We're continuing an annual tradition of counting down our top 10 articles of the year. The following article was originally published in August and is #6 in our countdown. See #7 here. With forbearance plans about to come to an end, many are concerned the housing market will experience a wave of foreclosures like what happened after the housing bubble 15 years ago. Here are four reasons why that won't happen. 1. There are fewer homeowners in trouble this time After the last housing crash, about 9.3 million households lost their home to a foreclosure, short sale, or because they simply gave it back to the bank. As stay-at-home orders were issued early last year, the overwhelming fear was the pandemic would decimate the housing industry in a similar way. Many experts projected 30% of all mortgage holders would enter the forbearance program. Only 8.5% actually did, and that number is now down to 3.5%. As of last Friday, the total number of mortgages still in forbearance stood at 1,863,000. That's definitely a large number, but nowhere near 9.3 million. 2. Most of the 1.86M in forbearance have enough equity to sell their home Of the 1.86 million homeowners currently in forbearance, 87% have at least 10% equity in their homes. The 10% equity number is important because it enables homeowners to sell their houses and pay the related expenses instead of facing the hit on their credit that a foreclosure or short sale would create. The remaining 13% might not all have the option to sell, so if the entire 13% of the 1.86M homes went into foreclosure, that would total 241,800 mortgages. To give that number context, here are the annual foreclosure numbers of the three years leading up to the pandemic: 2017: 314,220 2018: 279,040 2019: 277,520 The probable number of foreclosures coming out of the forbearance program is nowhere near the number of foreclosures coming out of the housing crash 15 years ago. The number does, however, draw a similar comparison to the three years prior to the pandemic. 3. The current market can absorb any listings coming to the market When foreclosures hit the market in 2008, there was an excess supply of homes for sale. The situation is exactly the opposite today. In 2008, there was a nine-month supply of listings for sale. Today, that number stands at less than three months of inventory on the market. As Lawrence Yun, Chief Economist at the National Association of Realtors (NAR), explains when addressing potential foreclosures emerging from the forbearance program: "Any foreclosure increases will likely be quickly absorbed by the market. It will not lead to any price declines." 4. Those in power will do whatever is necessary to prevent a wave of foreclosures Last month, the White House released a fact sheet explaining how homeowners with government-backed mortgages will be given further options to enable them to keep their homes when exiting forbearance. Here are two examples mentioned in the release: "For homeowners who can resume their pre-pandemic monthly mortgage payment and where agencies have the authority, agencies will continue requiring mortgage servicers to offer options that allow borrowers to move missed payments to the end of the mortgage at no additional cost to the borrower." "The new steps the Department of Housing and Urban Development (HUD), Department of Agriculture (USDA), and Department of Veterans Affairs (VA) are announcing will aim to provide homeowners with a roughly 25% reduction in borrowers' monthly principal and interest (P&I) payments to ensure they can afford to remain in their homes and build equity long-term. This brings options for homeowners with mortgages backed by HUD, USDA, and VA closer in alignment with options for homeowners with mortgages backed by Fannie Mae and Freddie Mac." When evaluating the four reasons above, it's clear there won't be a flood of foreclosures coming to the market as the forbearance program winds down. Bottom Line "The likelihood of us having a foreclosure crisis again is about zero percent." To view the original article, visit the BoomTown blog.
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4 Reasons Why the End of Forbearance Will Not Lead to a Wave of Foreclosures
With forbearance plans about to come to an end, many are concerned the housing market will experience a wave of foreclosures like what happened after the housing bubble 15 years ago. Here are four reasons why that won't happen. 1. There are fewer homeowners in trouble this time After the last housing crash, about 9.3 million households lost their home to a foreclosure, short sale, or because they simply gave it back to the bank. As stay-at-home orders were issued early last year, the overwhelming fear was the pandemic would decimate the housing industry in a similar way. Many experts projected 30% of all mortgage holders would enter the forbearance program. Only 8.5% actually did, and that number is now down to 3.5%. As of last Friday, the total number of mortgages still in forbearance stood at 1,863,000. That's definitely a large number, but nowhere near 9.3 million. 2. Most of the 1.86M in forbearance have enough equity to sell their home Of the 1.86 million homeowners currently in forbearance, 87% have at least 10% equity in their homes. The 10% equity number is important because it enables homeowners to sell their houses and pay the related expenses instead of facing the hit on their credit that a foreclosure or short sale would create. The remaining 13% might not all have the option to sell, so if the entire 13% of the 1.86M homes went into foreclosure, that would total 241,800 mortgages. To give that number context, here are the annual foreclosure numbers of the three years leading up to the pandemic: 2017: 314,220 2018: 279,040 2019: 277,520 The probable number of foreclosures coming out of the forbearance program is nowhere near the number of foreclosures coming out of the housing crash 15 years ago. The number does, however, draw a similar comparison to the three years prior to the pandemic. 3. The current market can absorb any listings coming to the market When foreclosures hit the market in 2008, there was an excess supply of homes for sale. The situation is exactly the opposite today. In 2008, there was a nine-month supply of listings for sale. Today, that number stands at less than three months of inventory on the market. As Lawrence Yun, Chief Economist at the National Association of Realtors (NAR), explains when addressing potential foreclosures emerging from the forbearance program: "Any foreclosure increases will likely be quickly absorbed by the market. It will not lead to any price declines." 4. Those in power will do whatever is necessary to prevent a wave of foreclosures Last month, the White House released a fact sheet explaining how homeowners with government-backed mortgages will be given further options to enable them to keep their homes when exiting forbearance. Here are two examples mentioned in the release: "For homeowners who can resume their pre-pandemic monthly mortgage payment and where agencies have the authority, agencies will continue requiring mortgage servicers to offer options that allow borrowers to move missed payments to the end of the mortgage at no additional cost to the borrower." "The new steps the Department of Housing and Urban Development (HUD), Department of Agriculture (USDA), and Department of Veterans Affairs (VA) are announcing will aim to provide homeowners with a roughly 25% reduction in borrowers' monthly principal and interest (P&I) payments to ensure they can afford to remain in their homes and build equity long-term. This brings options for homeowners with mortgages backed by HUD, USDA, and VA closer in alignment with options for homeowners with mortgages backed by Fannie Mae and Freddie Mac." When evaluating the four reasons above, it's clear there won't be a flood of foreclosures coming to the market as the forbearance program winds down. Bottom Line "The likelihood of us having a foreclosure crisis again is about zero percent." To view the original article, visit the BoomTown blog.
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What Real Estate Agents Should Know About HUD Assistance Program
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Growing Your REO Business
Guest contributor Windy Keefe of REALTOR®Mag says: Bank-owned inventory is slowing nationwide, but markets with higher levels still exist and are in need of REO agents and brokers to service them. According to Clear Capital's Home Data Index, over the last 3 months (December 2013–February 2014) 14.3 percent of all sales were REO. While this percentage has improved, it's still higher than precrisis levels, which hovered around 3 percent. At the metro market level, many still see elevated REO saturation rates. Chicago: 25.6% Detroit: 25.1% Dayton, Ohio: 24.2% Miami: 18.7% Atlanta: 17.9% St. Louis: 17.4% Cleveland: 16.5% Columbus, Ohio: 16.5% Listing REO properties continues to be a relevant, highly sought-after skillset. Brokers and agents with this expertise should make it know to those in need – that might mean a change the way you market your business.
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7 Reasons to Market the Home Affordable Foreclosure Alternative (HAFA) Program
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Friday Freebie: ForeclosureRadar
We’ve seen a wonderful response to our Friday Freebies series. By popular demand, we’ll continue to share the free and trial versions of products so that you can find the right solutions for your business. Today, we continue with ForeclosureRadar.   Free, 3-Day Trial from ForeclosureRadarDuring your free 3-day trial of ForeclosureRadar, you can:    Gain market knowledge and position yourself as the foreclosure expert  Check the foreclosure status of every property before you list, sell, manage or close  Identify and find the short sale opportunities that are most likely to close  Use foreclosure comps to get listings priced to sell and short sales approved  Preview upcoming REO listings and find REO listing opportunities  Partner with auction investors and generate buyer interest  Add foreclosure listings and search to your website   New features of ForeclosureRadar include:   ForeclosureRadar Alerts: New foreclosure filings matching your detailed criteria. Opening bids. Auction results. Changes in foreclosure status. ForeclosureRadar can now proactively alert you. ForeclosureRadar Moblie App: Find nearby foreclosures, search foreclosures, view daily auction schedules and update saved properties anywhere and at anytime using your iPhone, iPad or iPod Touch. Printing and Mailing: You've searched ForeclosureRadar for the new foreclosure notices and trustee sales. Take those search results and create a customized postcard or a door hanger in seconds!
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