The federal foreclosure moratorium, which covered about 70% of the nation’s home loans and about 80% of Philadelphia’s mortgages, expired on July 31. Housing experts expect foreclosures to increase in the coming months.
“The end of the government moratorium will not result in millions of foreclosures,” said Rick Sharga, executive vice president of RealtyTrac, a subsidiary of ATTOM, “but we are likely to see a steady increase in default activity. for the rest of the year ”.
Last month, New Jersey had the third highest foreclosure rate among states. according to ATTOM, real estate data provider. Lenders have foreclosed one out of every 4,809 housing units. In the country as a whole, the number of cases of repurchase of mortgaged property increased by 40% in July compared to July 2020, but 4% less than a month earlier.
“The situation is likely to be somewhere between mild and severe, at least in part because lenders may not want to be seen as grim reapers chasing vulnerable families out of their homes,” said Todd Theta, director of products and services. ATTOM technologies. statement. “We will definitely find out next year.”
Over the next six months, Zillow economists predict several hundred thousand households will emerge from tolerance – suspended mortgage payments – without a plan to return their mortgages to good credit with lenders, putting them at risk of foreclosures. The biggest wave of departures is expected in September and October.
Homeowners struggling financially during the pandemic were able to pause mortgage payments for several months to find work or cover expenses.
According to Jeffrey Reuben, president of WSFS Mortgage, most homeowners give up abstinence after six months. But most borrowers have the option to renew if their circumstances have not improved.
As of Aug.15, 1.6 million homeowners nationwide were in leniency, according to the Mortgage Bankers Association. This is 3.25% of the portfolio of mortgage companies. More than four out of five of these borrowers have extended abstinence plans.
The peak in mortgage abandonment was in May 2020, when more than 4 million mortgages were on hold. according to Freddie Mac…
By being lenient, homeowners are unable to refinance their loans in order to take advantage of historically low interest rates and lower their monthly payments.
Borrowers must pay back any missed mortgage payments. Typically, this means that either the lender extends the mortgage, including missed payments, for a longer period of time, or the lender records the missed payments at the end of the mortgage so that borrowers pay a lump sum at the end of the mortgage term.
Throughout the pandemic, patience “helped a huge number of people who needed this relief,” Ruben said.
The federal government did not extend the buyback moratorium that expired in July. The ban extended to federally backed mortgages such as FHA insured and guaranteed by Fannie Mae and Freddie Mac.
But the Federal Bureau of Consumer Financial Protection said that mortgage companies must first assess homeowners to determine if they are eligible for assistance programs and offer options to borrowers before they file new foreclosures for most mortgages. This rule applies from August 31st to the end of the year.
In Philadelphia sale of houses by the sheriff scheduled to resume in September.
City foreclosures before the pandemic still have to go Philadelphia Foreclosure Program… According to Chelsea Burrish, vice president of program impact at Clarifi, a Philadelphia-based nonprofit financial advisory organization, foreclosures in the city are “still not very high.”
“Homeowners are kind of waiting to see what happens,” she said. “They’re either still being lenient or they know they won’t get foreclosure notice” for a while.
According to Michael Frohlich, managing attorney for Home and Consumer Rights at Community Legal Services, foreclosures in Philadelphia range from 20 to 30 per month.
“The real surge is expected to happen next month,” he said.
With a strong housing market and rising home values, homeowners are generally in a better position than they were during the Great Recession, when many people owed more than their homes were worth. The rise in home equity allows homeowners to do better with their lenders.
“It will be a much softer landing than what we have experienced in the past,” Ruben said.
Homeowners can still apply for abstinence.
Fröhlich said that during the pandemic, some people spent their savings or pulled out of their retirement funds to pay for their homes, so now they are having problems paying off mortgages.
Most homeowners who are out of patience and are still stranded have several options. They may try to participate in a loan modification program with their lender. They may ask for a loan grace period to defer the required payments. They can sell their homes to pay off their debts.
Homeowners should ask themselves if they will have a stable income that will allow them to pay off their mortgages, Clarifi’s Barrish said. If not, homeowners must exhaust all of their loan abstinence and modification options. Housing consultants can help borrowers understand the programs available and discuss options with their lenders. If a home is not available in the long term, they should consider the best exit strategy, which involves selling their home.
“And if you do sell, will you be able to find suitable and affordable housing for your family? “It’s so hard to find affordable housing in Philadelphia,” Barrish said. “I think people are asking themselves these tough questions.”
According to a survey by the Mortgage Bankers Association, one in six borrowers gives up patience without a plan, putting them at immediate risk of foreclosure. Others said they planned to sell to avoid foreclosures. So Zillow analysis It is estimated that between 20% and 25% of borrowers could list their homes for sale, which could increase the available national housing supply from more than 200,000 homes.
According to Chris Glynn, senior economist-manager at Zillow, the “condescending departure” “will potentially ease the inventory crisis we’ve seen in housing markets over the past few years.”
“But,” said Fröhlich of Community Legal Services, “we know that the most affordable homes for many of our low-income clients are the homes they live in.”
Ruben said many WSFS Mortgage borrowers who give up on leniency are now refinancing their loans to reduce their monthly mortgage payments.
Experts advise homeowners to contact their lenders or be responsible when lenders contact them so that borrowers can work out next steps if they still need help after getting out of leniency or need a payment plan.
“It is for [lenders’] the best financial interest for working with borrowers, ”Ruben said.
Homeowners can call the Save Your Home Philly hotline at 215-334-4663 to get free help from a housing consultant or lawyer.
Homeowners struggling financially due to the pandemic may qualify for the state-run federal homeowner assistance fund. American Rescue Plan Act, Federal Coronavirus Relief Package, Highlighted $ 350 million to Pennsylvania and $ 325.6 million in New Jersey to help homeowners with mortgage payments and other housing costs. It is designed to prevent mortgage delays, foreclosures, utility outages, and loss of homes.
The Pennsylvania Housing Finance Agency and the New Jersey Housing and Mortgage Agency, which will manage the government programs, are still working out the details, but homeowners can use the funds to pay off late mortgages and taxes on real estate, insurance, and utilities. The Pennsylvania program is slated to launch in late fall.