Leave a Message

Thank you for your message. We will be in touch with you shortly.

Why the Forbearance Program Changed the Housing Market

Why the Forbearance Program Changed the Housing Market
When the pandemic hit in 2020, many experts thought the housing market would crash. They feared job loss and economic uncertainty would lead to a wave of foreclosures similar to when the housing bubble burst over a decade ago. Thankfully, the forbearance program changed that. It provided much-needed relief for homeowners so a foreclosure crisis wouldn’t happen again. Here’s why forbearance worked.
 
Forbearance enabled nearly five million homeowners to get back on their feet in a time when having the security and protection of a home was more important than ever. Those in need were able to work with their banks and lenders to stay in their homes rather than go into foreclosure. Marina Walsh, Vice President of Industry Analysis at the Mortgage Bankers Association (MBA), notes:
 
“Most borrowers exiting forbearance are moving into either a loan modification, payment deferral, or a combination of the two workout options.”
 
As the graph below shows, with modification, deferral, and workout options in place, four out of every five homeowners in forbearance are either paid in full or are exiting with a plan. They’re able to stay in their homes.
 
Why the Forbearance Program Changed the Housing Market | MyKCM

 

What does this mean for the housing market?
 
Since so many people can stay in their homes and work out alternative options, there won’t be a wave of foreclosures coming to the market. And while rising slightly since the foreclosure moratorium was lifted this year, foreclosures today are still nowhere near the levels seen in the housing crisis.
 
Forbearance wasn’t the only game changer, either. Lending standards have improved significantly since the housing bubble burst, and that’s one more thing keeping foreclosure filings low. Today’s borrowers are much more qualified to pay their home loans.
 
And while the majority of homeowners are exiting the forbearance program with a plan, for those who still need to make a change due to financial hardship or other challenges, today’s record-level of equity is giving them the opportunity to sell their houses and avoid foreclosure altogether. Homeowners have options they just didn’t have in the housing crisis when so many people owed more on their mortgages than their homes were worth. Thanks to their equity and the current undersupply of homes on the market, homeowners can sell their houses, make a move, and not have to go through the foreclosure process that led to the housing market crash in 2008.
 
Thomas LaSalvia, Chief Economist with Moody’s Analyticsstates:
 
“There’s some excess savings out there, over 2 trillion worth. . . . There are people that have ownership of those homes right now, that even in a downturn, they’d still likely be able to pay that mortgage and won’t have to hand over keys. And there won’t be a lot of those distressed sales that happened in the 2008 crisis.”
 
Bottom Line
 
The forbearance program was a game changer for homeowners in need. It’s one of the big reasons why we won’t see a wave of foreclosures coming to the market.

Recent Blog Posts

Stay up to date on the latest real estate trends.

The Down Payment Assistance You Didn’t Know About

Believe it or not, almost 80% of first-time homebuyers qualify for down payment assistance, but only 13% actually use it.

East Bay Newsletter - Sept. 2024

Nationally, the monthly cost of financing a median-priced home was 8.3% lower in August 2024 than in June because the median home price declined 2.1% over the past two… Read more

San Francisco Newsletter - Sept. 2024

In August, the average 30-year mortgage rate declined for the third month to 6.35%, a 0.87% drop from the 2024 high reached in early May. The Fed is expected to cut ra… Read more

San Francisco Market Update - August 2024

Nationally, home prices hit an all-time high in June 2024, and we estimate that prices may have bucked seasonal trends and climbed slightly higher in July.

East Bay Market Update - August 2024

In July, the average 30-year mortgage rate declined for the third month, falling to 6.78%, a 0.44% drop from the 2024 high reached in early May. The Fed is poised to s… Read more

Are You "Buy-Curious"?

Join Elevation Real Estate and JVM Lending as they make the case that now may be a good time to buy rather than continue renting. An event that promises to be a game-c… Read more

Are Home Prices Going To Come Down?

The most recent data from Case-Shiller shows that after being basically flat for a couple of months last year, prices are going up at a national level – just not as qu… Read more

How the Economy Impacts Mortgage Rates

One thing that can affect mortgage rates is the Federal Funds Rate, which influences how much it costs banks to borrow money from each other. While the Federal Reserve… Read more

Unlocking Homebuyer Opportunities in 2024

The housing market is in a transition in the second half of 2024. Here are four reasons why this may be a buyers chance to jump back into the market.

Let’s Talk

You’ve got questions and we can’t wait to answer them.