It's over 40 year mortgages extend the housing crash again might be a little
sarcastic, but is there really going to be a wave of foreclosures hitting
the market once for barren sins?
Probably not.
Here's the deal.
Look at the height of the pandemic mortgage companies created tons of
options for struggling homeowners through mortgage modifications and
modifications is basically just changing your mortgage from what the term it was
into a different term that helps you to be able to afford it more, the most popular
option being forbearance that we've heard of so much through the pandemic.
And we can see that how those efforts reached.
In July of 2020, and they've slowly declined and mortgage companies
that have tons of options to help people prevent foreclosure.
And we're continuing to see mortgage companies provide options other
than foreclosure, for example, the feared 40 year mortgage that we've
been hearing so much about is one of these loan modification options that
are becoming available for people who are struggling to be able to keep up
With the payments and the F H F A has a whole foreclosure prevention and
refinance report detailing the option.
Here and look, lenders don't want to foreclose.
I like it may sound counterintuitive.
Like the lender wants to foreclose and get a bunch of money, but it's a long
and expensive process for the lender to recover a home much more so than just
being able to receive a monthly payment.
They'd much rather have people paying back the loans, even if it requires like a
modification on the mortgage in the CFPB.
So they regulate consumer protection from financial servicers
came out with this super bowl.
Two mortgage companies saying there is a tidal wave of distressed homeowners
who will need help from their mortgage servicers in the coming months,
responsible servicers should be preparing.
Now there is no time to waste and no excuse for inaction.
No one should be surprised by what is coming.
Our first priority is ensuring struggling families get the assistance.
They need servicers who put struggling families first have
nothing to fear from our oversight, but we will hold accountable.
Those who cause harm to homeowners.
And families and FHA is home retention goals are exactly
what the CFPB is wanting.
That's keeping as many people out of foreclosure as possible because it
really is the worst possible outcome for
Our economy as a whole, it's very narrow sighted to say like the foreclosures
is going to be good because it's going to increase listings and reduce
prices, but it is the worst possible outcome that can actually happen.
Then I know it sounds good to have a bunch of foreclosures and assume it's going
to automatically fix the housing issues that so many people are facing right
now, like lowering prices and increasing the amount of homes available, but in
oceanic amount of workload, Will only create rippling effects on the economy.
It's really not the fix that you may think it is like that sweet mortgage money.
Isn't just sitting in some bank.
Like those mortgages are represented by bonds that are likely in your retirement
account and at minimum Invested in by the government that has a wide reaching
consequences on everybody in the U S and in millions, if not billions of dollars
of loss does not go and felt by the person seemingly unaffected by this problem.
And at a large scale foreclosures create.
All of these problems in the economy that can drive job loss and unemployment,
which causes future foreclosures as well.
So on top of the modifications available, here's why I think we won't
see like a tsunami of foreclosures.
Number one, equity has an all time high Adam data says 70% of homeowners have
more than 20% of the equity in their home.
And we can see by this chart, how much equity has been
increasing over a period of time.
All time high with equity that's money that homeowners can use
to be able to refinance or get into modifications easier.
If they are facing distress, also forbearance payments
are pushed to the end of the loan.
There seems to be this like this myth or this unthought through thing where
people believe that somehow there's going to be this massive lump sum payment.
All of a sudden forbearance is going to end.
And then you're going to have a bunch of people facing foreclosure as if
somehow the end of forbearance means foreclosure, which is not the case.
Foreclosures are only needed.
If a homeowner can't keep up with the monthly payment or a modified
payment, if it needs to be.
Missed payments don't equal foreclosure, just because you missed a payment, doesn't
mean that the lender kicks you out.
There's a whole process.
And it usually starts with a lender trying to avoid the foreclosure because it's
expensive and takes a long period of time.
And the lender would much rather put you in a modification so that they can be paid
back the way they want to, rather than a foreclosure is like last line effort for
a lender to be able to recover that money.
If a homeowner can't
pay it back in any way, foreclosures take a long time to process, not to mention
how backed up the legal system would be.
If there is this whole wave of foreclosures, that all
of a sudden just comes up.
Ultimately, the likelihood of this like foreclosure tsunami that people are
talking about is just not likely, we're going to see forbearance come to an end.
At some point might get extended.
We'll see what happens.
A lot of people are like kicking the can down the road, which
no one knows necessarily fair.
But forbearance is going to come to an end at some point, but forbearance
doesn't convert into foreclosure, just because someone needed assistance
at that period of time, doesn't mean that they're not back at a job now.
And in the options and protections for homeowners is vastly more
helpful than those in two weeks.
When we had the 2008 crash and mortgage companies, frankly, are
not really interested in rehashing a struggle like that again.
So will there be more short sales?
Yeah, most likely.
Will there be a moderate increase in foreclosures, most likely as well,
will that increase some of the listings in inventory available most likely?
Will it decrease prices a ton?
I don't imagine we're going to be seeing that moderate amount of
increase in foreclosures or short sales actually increased prices as much.
Especially with demand being as high as it is right now.
A foreclosure search.
I just highly doubt it.
So I'd love to hear, what do you think is the inevitable being delayed
or is the foreclosure tsunami
just the fairy tale of market crash chat?