The COVID-19 pandemic has caused millions of people to experience a significant decline in their incomes. Although the CARES Act allowed homeowners to seek mortgage forbearance for up to 12 months, that protection is set to expire for most borrowers by the end of April 2021. Despite this, few financial professionals expect a significant number of foreclosures to occur in the near future.
Many Borrowers Didn’t Actually Need Forbearance
According to a survey conducted by MBA, 30% of those who took forbearance as of May 2020 were making their mortgage payments. This suggests that some borrowers simply took advantage of this option to provide themselves with financial flexibility during an uncertain time. Furthermore, data indicates that most borrowers could remain current on their mortgages as restrictions were lifted throughout 2020.
Foreclosure Can Be a Tedious Process
Depending on where a person lives, it can take up to three years to complete the process of foreclosing on a property. During that time, a lender will likely need to spend a significant amount of money on legal fees. Therefore, a mortgage provider typically prefers to work with a borrower to make it easier for them to stay current on an existing loan.
In some cases, a lender may agree to defer payments for several months until a borrower is in a better financial position. A loan provider may also decide to extend the term of an existing mortgage to reduce its monthly payment. Alternatively, the interest rate may be reduced to make each monthly payment more affordable.
Homeowners Could Choose to Sell Their Properties
In recent years, an increase in real estate prices means that homeowners are more likely to have positive equity in their homes. Therefore, those who cannot afford to keep up with their mortgage payment may choose to sell their properties. They can then use the proceeds from the sale to repay their lenders without experiencing any negative impact on their credit scores or histories.
Short Sales Could Be an Option
A short sale may allow a borrower with negative equity in their property to walk away from a mortgage before foreclosure occurs. As a general rule, a person who engages in a short sale will experience a steep drop in their credit score. However, it can be preferable to foreclosure as it indicates to future lenders that a borrower made a good faith effort to handle an outstanding debt balance.
Foreclosures Will Still Occur In Some Cases
Although it is unlikely that there will be a steep uptick in foreclosures in 2021, not everyone will avoid having their properties repossessed. This is why those who work for mortgage companies are encouraged to invest in the tools necessary to account for any extra volume that they experience over the next several months.
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Since 2008, BNN Services has been trusted by title agencies, mortgage lenders, servicers, and consumers to perform loan and document signings in multiple languages across the country.
Unlike other signing services, BNN Services “touches” every file 8 or 9 times to ensure the process moves forward free of delays. That’s why we’ve completed over 250,000 signings in all 51 jurisdictions and maintained a closing ratio of 96 percent.
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