As the COVID-19 pandemic began to spread across the United States last spring and states announced shut downs, many Americans found themselves unemployed or underemployed. As a result, the federal government took swift action to provide mortgage payment relief by allowing homeowners to enter forbearance. A year later, as of March 2021, 2.5 million homeowners were still in forbearance, according to the Mortgage Bankers of America.
Realtor.com published an article, noting the opinions of experts who explain that, despite this alarming number of U.S. homeowners behind on payments, a potential foreclosure crisis is unlikely. In the article, reporter Sharon Lurye explains, the current housing market conditions are likely to provide a safety net for many of homeowners. Houses, in many parts of the United States, continue to be in high demand and the inventory remains low. Coupled with low interest rates, homeowners behind on payments, possible nearing the end of their forbearance, could still decide to sell the home for a profit. Additionally, as Americans getting their footing and learn to adjust to the current conditions, forbearance rates dropping nationwide.
Nevertheless, there are still areas of the country where homeowners are not only seriously behind on payments, but the housing market is not as strong due to weak economies and lack of employment. These homeowners will continue to need assistance by reaching out to their lender with the hopes of renegotiating the terms of their loan in a way that makes it feasible to make the payments. Still, some may decide to just sell and move to a rental property, assuming they can find a property to rend.
The good news, it seems that the U.S. isn’t headed toward a wide-spread foreclosure crisis, however there are Americans that continue to struggle and may for months and years to come.
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Despite the fact that many Americans have struggled financially as a result of the pandemic and subsequent shut downs that led to layoffs and business closures, foreclosures in the first quarter of 2020 declined almost 10% from the previous year. Specifically, home mortgages backed by Fannie Mae and Freddie Mac, who entered into a conservatorship and have been working to implement foreclosure prevention.
While third-party foreclosures as well as foreclosure starts both saw drops in numbers in comparison to the first quarter of 2019, the number of forbearance plans rose from less than 7,000 in the first quarter of 2019 to over 170,000 in the first quarter of 2020. Additional efforts to keep Americans in their homes and avoid foreclosure include loan modifications where homeowners have received lower monthly payments, principal forgiveness or extended term modifications.
According to an article published by DSNews.com, reported by Krista F. Brock, Freddie Mac and Fannie Mae, “Since entering conservatorship, Fannie Mae and Freddie Mac have completed 4.4 million foreclosure prevention efforts, with 3.7 million homeowners able to retain their homes as a result.” The efforts are resulting in positive numbers with regards to loan performance as well. The number of loans, according to the FHFA’s Report, between 60 and 90 days delinquent are showing slight declines from the end of 2019.
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Real Estate is a popular investment vehicle for American investors. In fact, 89% of investors put their money into real estate, according to a report by Better Homes and Garden Real Estate. In a recent article published by Forbes, real estate experts provide reminders and warnings regarding real estate investments in order to help insure a profitable investment.
One real estate professional, Lee Kiser, reminds investors to study the real estate taxes of a property before making the purchase. Its important to understand what the upcoming tax liability may be down the road, and a real estate tax professional may be able to help an investor prepare accordingly.
Shelling out the money for a professional inspection and appraisal might not be top of the list for investors, but according to Angela Yaun of the Day Realty Group, it may help save more money for the investor later. The investor may be able to get items covered under a home warranty if they are proven to be functioning at the time of the inspection. It can also make the buyer aware of repair expenses they should plan for later. A professional appraisal will provide the most accurate square footage and appraised value, important facts to have on hand when the investor is looking to sell their property.
The article goes on to detail the importance of understanding Home Owners Association restrictions, obtaining a Master Land Use plan for the area surrounding the property, and getting accurate and professional estimates for repairs, holding costs and closing costs.
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Photo Credit: Antonio Carlos Cascatrina
“A strong seller’s market along with political pressure has likely motivated lenders to complete the foreclosure process over the past year on many vacant properties that were lingering in foreclosure limbo for years,” Attom Senior Vice President Daren Blomquist said in a statement.
As a result, the number of vacant bank-owned properties in the Chicago-land area has almost doubled since the third quarter of 2015; the number has increased from 1,245 in the third quarter of 2015 to 2,379 by the end of the second quarter of 2016. The good news is, with an average market time of 92 days in the Chicago-land area, these foreclosures may not remain vacant for long.
According to an article written by Dennis Rodkin, published by Crain’s Chicago Business, another effect of the strong sellers’ market is a significant decrease in the number of “zombie foreclosures”. Instead of delaying the foreclosure process longer, the banks are moving forward with seizing the property, and moving it through the pipeline. Ultimately, a vacant foreclosure is more desirable than a zombie foreclosure. “Assuming that the foreclosing lenders are maintaining these properties and paying the property taxes, they pose less of a threat to neighborhood quality than zombie foreclosures,” he said.
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Foreclosures on homes in many U.S. cities lead to investors purchasing these “distressed” homes at deeply discounted prices. Consequently, the value of the other homes in these cities declined as well.
However, some good news has been released about this sector of the real estate market. According to an article published in DSNews.com by Brian Honea, there has recently been a decline in the number of distressed homes for sale. More specifically, as of May 2016, the number of distressed homes for sale decreased by 4 percent over the year. The lower inventory of foreclosed, REO and short sale homes has helped increase the demand for homes and, subsequently, increased the home values in those areas.
Honea quotes CoreLogic Chief Economist Frank Nothaft, “Overall, the homes-for-sale inventory remains relatively lean, while demand to buy homes has increased because of an improving labor market, more optimistic levels of consumer confidence, and continuing low mortgage rates.”
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Photo Credit: Taber Andrew Bain