Why the Forbearance Program Changed the Housing Market

By
Real Estate Broker/Owner with Arizona Resource Realty BR518926000

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. Here’s why forbearance worked.

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 lenders to stay in their homes rather than go into foreclosure. Marina Walsh, Vice President of Industry Analysis at the Mortgage Bankers Association (MBA), notes:

“Most borrowers exiting forbearance are moving into either a loan modification, payment deferral, or a combination of the two workout options.”

As the graph below shows, with modification, deferral, and workout options in place, four out of every five homeowners in forbearance are either paid in full or are exiting with a plan. They’re able to stay in their homes.

Why the Forbearance Program Changed the Housing Market | MyKCM

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 moratorium was lifted this year, foreclosures today are still nowhere near the levels seen in the 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 their home loans.

And 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 houses and avoid foreclosure altogether. 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 their 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.

Thomas LaSalvia, Chief Economist with Moody’s Analyticsstates:

“There’s some excess savings out there, over 2 trillion worth. . . . There are people that have ownership of those homes right now, that even in a downturn, they’d still likely be able to pay that mortgage and won’t have to hand over keys. And there won’t be a lot of those distressed sales that happened in the 2008 crisis.”

Bottom Line

The forbearance program was 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.

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Specializing in Payson AZ Real Estate, Bank Foreclosures, Homes for Sale in Payson, Land for sale in Payson, and more... Visit me at www.ArizonaResourceRealty.com and learn about my REO Broker Profile in Arizona.

 
 
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Comments (3)

Laura Cerrano
Feng Shui Manhattan Long Island - Locust Valley, NY
Certified Feng Shui Expert, Speaker & Researcher

It’s really interesting overall to see what the laws have been brought to years in where things are going or where they’re staying

Aug 10, 2022 09:20 PM
Tamra Lee Ulmer

Thanks for reading, Laura. Have a great day!

Aug 11, 2022 12:04 PM
Richard Weeks
Dallas, TX
REALTOR®, Broker

Great information, thanks for sharing.  I hope you have a great day.

Aug 11, 2022 02:15 AM
Tamra Lee Ulmer

Thanks for your time, Richard. Have a great day!

Aug 11, 2022 12:04 PM
Grant Schneider
Performance Development Strategies - Armonk, NY
Your Coach Helping You Create Successful Outcomes

Hi Tamra - I did need hear the figures before but it makes perfect sense given the supply of homes.

Aug 11, 2022 03:44 AM
Tamra Lee Ulmer

Thanks for your time, Laura. Have a great day!

Aug 11, 2022 12:04 PM