Peak foreclosures unlikely, analysts say
Forbearance programs for federally guaranteed mortgages are quickly coming to an end, but the National Association of Realtors said its research shows there will not be a glut of foreclosed homes on the market, as some had warned him.
The national forbearance moratorium will end on July 31, but most homeowners are expected to end with a new payment plan in place, so an increase in foreclosures is unlikely.
Mortgage Bankers Association data shows that approximately 2.7 million US homeowners are currently behind on their mortgage payments, of which 1.8 million are classified as “seriously past due,” meaning they are in arrears. for 90 days or more. But his data also shows that 77% of forborne homeowners have a loss mitigation plan in place, meaning their payments have been restructured to make them more affordable.
There are, however, around 400,000 homeowners who have already exited forbearance, or will be exiting soon, with no loss mitigation plan in place.
NAR researcher Gay Cororaton said in a recent article on the Economists Outlook Blog it is not clear why these owners came out of forbearance without any plans, as no date is available. Maybe it’s because they can afford to pay their mortgages, he said, or because they’ve already decided foreclosure is their best option.
“If all of those 400,000 homes are foreclosed and listed, that will add approximately 24 days of supply to the housing market given the current monthly sales pace of 483,333 existing homes,” Cororaton said.
However, he stressed that such a situation is unlikely. He said that since only one in ten borrowers choose to list their homes, it is more likely that only a third, if not less, of those 400,000 homes will be foreclosed or end up being listed. As such, they will provide limited relief from the current housing supply, but by no means an overabundance of new listings that would drive prices down, he wrote.
“If only a third of these houses are on the market, that represents 133,200 houses, which will add only 8 days of additional supply,” said Cororaton. “If two-thirds of these homes end up on the market, that’s about 268,000 homes, which adds 17 days of supply.
MarketWatch reported that homeowners with mortgages guaranteed by the Federal Housing Administration are most at risk of delinquent on their loans, according to an analysis by the American Enterprise Institute. This study found that about 15% of the 7.6 million FHA-guaranteed mortgages were in arrears in May. Of these, 11% were serious delinquents. The number includes loans that are withheld.
Meanwhile, the number of Americans still asking for forbearance has dropped dramatically in recent weeks. Many have already ended their forbearance plans and resumed their payments, while others have been able to modify their loans.
“If an amendment does not remedy the delinquency, the next option is for the borrower to sell the house,” said Edward Pinto, director of the American Enterprise Institute’s housing center, and researcher Tobias Peter . “Given the rapid appreciation of home prices, this alternative should allow many struggling homeowners to avoid foreclosure, pay off the mortgage, cover selling costs and maintain their credit history. “
Distressed borrowers who cannot sell their home will eventually face foreclosure.
“As a result, a buyer’s market could develop in postal codes with high exposure to these borrowers,” the researchers said. They noted that many of these areas may be where there is a high concentration of FHA defaults.