February 16, 2021– a day that will live in infamy forever. No, it’s not that big of a deal. However, if you’re going to be in the real estate market, it is something you need to know about. On that day, President Biden officially extended the mortgage forbearance and foreclosure moratorium. Lets let’s talk about why it is important.
Simply, this decision gives homeowners a longer runway to be able to figure out what to do in order to catch up on the COVID late payments they’ve accrued on their homes. In theory, this will keep us from facing a huge wave of foreclosures in the short term
One side note that’s really important but is not the main subject of this video, is that evictions were NOT extended. So that means evictions are going through at the end of March on the federal level, instead of the end of June. (June is when the foreclosure and forbearance payments have been extended to.) Keeping this in mind, let’s talk about a couple of logistical things.
1. Anybody who applies for forbearance for the first time before the end of June 2021 will be given up to six months of forbearance.
I used to sell foreclosures and do short sales. Based from my experience, it usually takes three to four months at the minimum to execute one of those sales. Sometimes, it can even take between 12 to 24 months to go through the whole process.
With the mortgage forbearance and foreclosure moratorium extended, this means that people who have applied by or in June could be in forbearance until the end of 2021. Additionally, the people who’ve already been in forbearance can now basically ride this thing out for longer. They’ll have more time to figure out how they’re going to get caught up. Hopefully, this will also help them get everything taken cared of so that they don’t end up in foreclosure, come the middle of the year.
If you want to know more about the foreclosure process and how long it usually takes in California, I also did another video on that which you can watch HERE. The most important thing to note though is that simply, foreclosure is NOT a fast process, especially here in the golden state.
2. The formation of the American Rescue Plan
If we’re talking about mortgage forbearance and foreclosures, one other thing we need to mention is the American Rescue Plan. As a summary, it’s a $10 billion fund designed to help struggling homeowners get caught up. Moreover, when you look at the White House’s page to figure out exactly what this money is going to be used for, it simply says:
“To help struggling homeowners catch up on their mortgage payments and utility costs.”
Overall, this relief is critical for homeowners with mortgages in the private market who are not able to take advantage of today’s actions but may face longer term challenges. In addition, people who don’t qualify for forbearance for various reasons who will also need help with not getting foreclosed on, will also benefit from it.
The bottom line? It’s really interesting how the current administration is pushing a ton of chips into the direction of home ownership to help people stay in their homes. There may be a lot of people on the internet talking about how the market is going to crash and how everything is ruined. Amidst all of this, there’s still a very observable and obvious actions that this administration is taking to make sure we don’t end up in foreclosure hell, like we did in 2008.
Will people just walk away from hundreds or thousands of dollars of equity?
If you or someone you know is having trouble with their mortgage, or if you’re waiting for foreclosures to show up so you can get a good deal on a house, the extended mortgage forbearance and foreclosure moratorium is definitely something you should think about and consider.
Ultimately, as I’ve said in other videos, and as is evident by how aggressively priced homes are, there’s still a lot of equity out there. Also, the likelihood that people will just walk away from hundreds or thousands of dollars of equity is simply zero. I don’t think that you’re going to have a situation where a lot of people just give their homes back to the bank and see their hard-earned equity evaporate. If anything, once the mortgage forbearance and the foreclosure moratorium are lifted and people still can’t get caught up, you might see a 5-10 percent inventory bump as the equity rich owners will try to cash out.
Ultimately, unless the buyer pool shrinks up significantly and interest rates drive up drastically, we are likely to stay on this course. Then of course here locally, in California, Senate Bill 1079 was just recently passed which changes all the rules on who can buy foreclosures at auctions and how you buy them, just to name a few. If you also want to know more about the new Senate Bill, let’s talk about that in another video which you can watch here.
I hope my video and blog on the extension of the mortgage forbearance and foreclosure moratorium has helped you.
If I can give you more context on the process of buying or selling your home, please do not hesitate to reach out. My information is below.
Here’s to all your success!