Under the CARES Act, homeowners with conventional, FHA, VA, or USDA loans could request an initial home loan forbearance for up to six months. They could also request a six–month extension, for up to one year of total forbearance. However, these emergency measures are now beginning to expire for many Americans. Not surprisingly, this is resulting in an increase in the number of foreclosures across the country. Is this cause for panic or is this to be expected? We take a look at the data below.
A look at the numbers
According to data from the mortgage data firm ATTOM, new foreclosures or starts rose by 32% from July to October as compared to the April to July time period. Furthermore, the number of foreclosures were also up 67% as compared to the same time period in 2020. Although these numbers are startling, they must be kept in perspective since foreclosures have been kept significantly low since the start of the pandemic due to emergency aid programs. As a result of the mortgage forbearance programs, millions of homeowners have been able to avoid foreclosure. When comparing the number of foreclosures in Q3 ’21 to a “normal” baseline in Q3 ’19 (prior to the pandemic), they are actually down by 60%.
Typically, new foreclosure filings average about 40,000 per month in the U.S. However, once the mortgage aid programs were initiated due to the pandemic, this figure dropped to under 5,000 per month. The most recent data for the month of September indicated a total of 19,600 foreclosures, which was a 24% increase from the month of August. Of course, this figure was dramatically higher when compared to September 2020 (102% increase in foreclosure filings in September ’21 vs September ’20).
As for new foreclosures from the time period between July 2021 and October 2021, they were as follows:
- Florida: 5,400
- Illinois: 3,600
- Texas: 3,000
- Ohio: 2,600
- New Jersey: 2,100
- New York: 2,000
Summary
An increase in foreclosures filings is certainly to be expected as we begin exiting out of the various emergency aid programs for mortgages. Once again, it is important to keep these data in perspective as they are being compared to artificially low foreclosure starts in 2020 due to the various aid programs. Assuming we continue seeing a similar trend in foreclosure starts for the remaining months of the year, we will still end up the year significantly below what would be typically seen in a normal housing market. If you are a buyer in this market, this may be a good time to look out for buying opportunities during the coming months as there is typically less competition in the market due to seasonal trends.
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