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Will the Foreclosure Moratorium Affect This Real Estate Market

By Lucas Smith | December 28, 2021

According to current market data, 2 million mortgage borrowers are seriously delinquent, that is, 90 days late. How will this affect our red hot real estate market?

Here is a quick look at our current market: Active listings are down by 37.7%. In Orange County we are down by 1/3 of the inventory we normally have. Home values have increased by 19% in just 1 year!

If someone needs to sell due to not being able to make up payments… good news! They have equity!

At the beginning of the year we had 7 Million homes in Forbearance. Now we have just 2.1 million, so we’re cautiously optimistic.

What’s driving this decrease in forbearance? A few factors the least of which is that those borrowers who are coming out of forbearance were much more well qualified to buy the home when they initially purchased, meaning that their options for recovery are much stronger.

Our market fundamentals are stronger than many markets, and while some are not as optimistic because of higher prices, appreciation since COVID is pushing 30%.

The truth for all of us is that our home is where we live with our families, and therefore we all prioritize making sure that our families have a safe place to live, and if we have the means available we will bring that current if at all possible, and that’s why we are seeing the numbers in forbearance drop so drastically.

What happens when the moratorium lifts?

The Consumer Financial Protection Bureau or CFPB came out with new rules regarding these seriously delinquent borrowers:

  1. Lenders must give borrowers a meaningful opportunity to pursue loss mitigation options.
  2. Lenders must allow mortgage servicers to help borrowers faster.
  3. Lenders must tell borrowers their options. What are this new options?
    1. The borrower can resume regular mortgage payments. The borrower can request that missed payments be added to their balance and must negotiate with their lender to have this done.
    2. The borrower can lower their monthly mortgage payments. In order to do this they must request and negotiate a loan modification.
    3. The borrower can sell their home the total from the sale must satisfy the balance of the note or the borrower will have to negotiate a short sale. If they have equity, the borrower will keep the remaining equity as a profit.

What happens when foreclosure is not avoidable

There are no available options for borrowers who are more than 120 days behind before March 1st, 2020 and not responding to lender outreach.

If you know someone who is concerned and wants to learn more about their options, we would be happy to help them.

For a free copy of our any of our Guarantee Certificates, or for a free market analysis, please call us 714-406-1414

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