When the pandemic hit in 2020, many experts thought the housing market would crash. They feared job loss and economic uncertainty would lead to a wave of foreclosures similar to when the housing bubble burst over a decade ago. Thankfully, the forbearance program changed that. It provided much needed relief for homeowners so a foreclosure crisis wouldn't happen again.

Forbearance enabled nearly five million homeowners to get back on their feet in a time when having the security and protection of a home was more important than ever. Those in need were able to work with their banks and their lenders to stay in their homes rather than go into foreclosure.

As the graph shows, with modification, deferral, and workout options in place, four out of every five homeowners in forbearance are either paid in full, or exiting with a plan. They were able to stay in their homes, so what does this mean for the housing market?

Since so many people can stay in their homes and work out alternative options, there won't be a wave of foreclosures coming to the market. And while rising slightly since the foreclosure monitoring was lifted this year, foreclosures today are nowhere near the levels seen in a housing crisis.

Forbearance wasn't the only game changer either. Lending standards have improved significantly since the housing bubble burst and that's one more thing keeping foreclosure filings low. Today's borrowers are much more qualified to pay off their home loans while the majority of homeowners are exiting the forbearance program with a plan, for those who still need to make a change due to financial hardship or other challenges, today's record level of equity is giving them the opportunity to sell their house and avoid foreclosure all together.

Homeowners have options they just didn't have in the housing crisis when so many people owed more on their mortgages than their homes were worth. Thanks to the equity and the current undersupply of homes on the market, homeowners can sell their houses, make a move, and not have to go through the foreclosure process that led to the housing market crash in 2008.

Bottomline, the forbearance program is a game changer for homeowners in need. It's one of the big reasons why we won't see a wave of foreclosures coming to the market.

Posted by Andy Mandel on
Email Send a link to post via Email

Leave A Comment

e.g. yourwebsitename.com
Please note that your email address is kept private upon posting.