With the arrival of the COVID-19 pandemic, the past year for most homeowners has been anything but ordinary. The unemployment rate has skyrocketed, and many people have been worried about reaching a point where they’ll be unable to make their mortgage payments. For many people, foreclosures could be happening in the near future.
While government assistance has allowed some families to keep their homes, for the time being, alarm bells are now ringing warnings about a possible flood of mortgage delinquencies in 2021. Some are already preparing for this by looking into housing counseling options and other ways to avoid foreclosure. With that being said, the following warning signs may signify a crisis that’s now on its way.
Delinquency Rates On The Rise –
One of the most worrisome signs that things are awry in the real estate landscape right now is the increasing rate of delinquencies. Total delinquencies in home mortgage payments have reached 6.6% in the second quarter of 2020.
This is alarming because the last time that the delinquency rate was this high was back in 2013 when the rate was at 6.7%. While there were no lockdowns due to a pandemic in 2013, it’s important to note that the 6.7% rate then is much less concerning than a 6.6% rate now. This is because the rate in 2013 was a decrease from the year before when the rate was 7.4% in 2012. That too was a decrease from the year before it when 9.3% of home loans were in delinquency status, and many had to save their homes by using foreclosure prevention counseling.
In other words, 2013’s rate was the tail end of the effects felt from the 2007-2010 subprime mortgage crisis. It was an improvement from previous years and a sign that things were getting better. There was a decrease in the rate, not an increase as we’re seeing now.
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Why Might 2021 Be Worse?
The US government has agreed to provide assistance to Americans in a section of the Coronavirus Economic Stabilization 2020 ACT (CARES) that covers home foreclosures. This act provides two major forms of protection for home loan borrowers.
Regarding delinquencies, it prevents lenders of federally or GSE-backed mortgages from foreclosing on borrowers’ homes until at least December 31, 2020. It also allows borrowers to request the forbearance of foreclosure of up to 180 days if they are unable to pay mortgage payments due to COVID-19. This initial 180-day extension can be prolonged a second time for an additional 180 days as well.
What this all means is that people who currently are unable to pay their mortgages are under no requirement to pay them due to the impact of COVID-19. But the clock is ticking, and those who filed for forbearance only have a maximum of 360 days to find a way to start paying their mortgages again.
With new cases of COVID-19 hitting record highs still and the possibility that future lockdowns can still occur, next year is looking very bleak for those who are already struggling to pay their bills. Homeowners who are already deep in debt may face compounding financial problems once the current home loan moratorium expires.
How To Avoid Foreclosure –
For those who might be facing the possibility of foreclosure, housing counseling is one option worth looking into. This type of service is focused on keeping people in their homes by both informing the general public and by using options available.
Some possible options, such as loan consolidation, refinancing, and educating homeowners about housing laws, can sometimes mean the difference between losing a home and finding better ways to stay in one. Foreclosure prevention counseling is about homeowners knowing their rights and knowing what resources are available that they can take advantage of. Advantage CCS offers Foreclosure Prevention Counseling to Pennsylvania residents only as part of our Housing Counseling services. You can contact the National Foundation of Credit Counseling (NFCC) for a local non-profit agency that can help you!