According to the latest report from Black Knight, Inc., a
well-respected provider of data and analytics for mortgage companies, 6.48
million households have entered a forbearance plan as a result of financial
concerns brought on by the COVID-19 pandemic. Here’s where these homeowners
stand right now:
2,543,000 (39%) are current on their payments
and have left the program
625,000 (9%) have paid off their mortgages
434,000 (7%) have negotiated a repayment plan
and have left the program
2,254,000 (35%) have extended their original
512,000 (8%) are still in their original
116,000 (2%) have left the program and are still
behind on payments
This shows that of the almost 3.72 million homeowners who
have left the program, only 116,000 (2%) exited while they were still behind on
their payments. There are still 2.77 million borrowers in a forbearance
program. No one knows for sure how many of those will become foreclosures.
There are, however, three major reasons why most experts believe there will not
be a tsunami of foreclosures as we saw during the housing crash over a decade
Almost 30% of borrowers in forbearance are still current on
their mortgage payments.
Banks likely don’t want to repeat the mistakes of 2008-2012
when they put large numbers of foreclosures on their books. This time, many
will instead negotiate a modification plan with the borrower, which will enable
households to maintain ownership of the home.
With the significant equity homeowners have today, many will
be able to sell instead of going into foreclosure.
Will there be foreclosures coming to the market? Yes. There
are hundreds of thousands of foreclosures in this country each year. People
experience economic hardships, and in some cases, are not able to meet their
Here’s the breakdown of new foreclosures over the last three
years, prior to the pandemic:
Through the first three quarters of 2020 (the latest data
available), there were only 114,780 new foreclosures. If 10% of those currently
in forbearance go to foreclosure, 275,000 foreclosures would be added to the
market in 2021. That would be an average year as the numbers above show.
What happens if the number is more than 10%?
If we do experience a higher foreclosure rate from those in
forbearance, most experts believe the current housing market will easily absorb
the excess inventory. We entered 2020 with 1,210,000 single-family homes
available for purchase. At the time, that was low and problematic. The market
was experiencing high buyer demand, and we needed more houses to meet that
demand. We’re now entering 2021 with 320,000 fewer homes for sale, while buyer
demand remains extremely strong. This means the housing market has the capacity
to soak up a lot of inventory.
There will be more foreclosures entering the market later
this year, especially compared to the record-low numbers in 2020. However, the
market will be able to handle the increase as buyer demand remains strong.