It is no secret that the current pandemic has created significant financial obstacles for many Americans. Job losses and/or reduced wages continue to be a common byproduct of the current environment. Therefore, one would expect the foreclosure market to react accordingly. However, the CARES Act of 2020 includes a moratorium on evictions as well as mortgage forbearance. This program has essentially allowed Americans to stay in their homes while dealing with financial shortfalls. Originally set to expire earlier in 2020, this program has been extended several times. Of note, the Biden Administration just announced that it is extending the COVID-19 forbearance and foreclosure protections for homeowners through June 30, 2021. According to the White House announcement, one in five renters are behind on rent today and over 10 million homeowners are behind on mortgage payments. However, the actions announced this week do not address a federal moratorium through March 31, 2021 on evictions of tenants who’ve fallen behind on rent.
Updates to the CARES Act and moratorium program
- Extend the foreclosure moratorium for homeowners through June 30, 2021
- Extend the mortgage payment forbearance enrollment window until June 30, 2021 for borrowers who wish to request forbearance
- Provide up to six months of additional mortgage payment forbearance, in three-month increments, for borrowers who entered forbearance on or before June 30, 2020.
According to ATTOM Data Solutions’ January 2021 U.S. Foreclosure Market Report, a total of 9,702 U.S. properties currently had foreclosure filings. This report included default notices, scheduled auctions or bank repossessions. The results showed a drop from 11% from a month earlier and 80% from a year ago. Overall in Florida, the number of foreclosure properties dropped by 83% year-to-year in January.
Essentially, the moratorium and CARES Act mortgage forbearance program have effectively prevented millions of seriously delinquent loans from entering the foreclosure process.
States with highest foreclosure rates
Although foreclosures have been down overall, the states with the highest foreclosure rates are:
- Delaware: 1 in every 4,923 housing units
- Louisiana: 1 in every 6,581 housing units
- Florida: 1 in every 7,920 housing units
- Indiana: 1 in every 8,668 housing units
- Alabama: 1 in every 8,707 housing units
The foreclosure moratorium has been a necessary step in coping with the financial devastation caused by the COVID-19 pandemic. With multiple extensions seen with this program during the past months, it is unclear as to when this program will ultimately end? Of course, the question will be how many foreclosures will hit the market once the program reaches the end. Furthermore, a flood of foreclosures hitting the market will not bode well for the overall real estate market either.
Needless to say, every market is different and will react in a unique way. As a home buyer or investor, it is important to pay close attention to local market dynamics. Ideally, the market that you are considering is thriving with more planned job creation in the future. On the flip side, a local market that will see more economic challenges ahead may be hit harder by a potential onslaught of distressed properties coming to the market.
As always, it is critical to consult with a local real estate expert. If you are in South Florida, Live South Florida Realty, Inc. has experienced real estate professionals ready to assist you. Call us today!