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3 Graphs That Prove We’re Not Headed for a Foreclosure Crisis

Monday, November 16, 2020   /   by Teresa Dipeso

3 Graphs That Prove We’re Not Headed for a Foreclosure Crisis

We all know the saying about assumptions.

And if you don’t, well…just Google it.

With the massive surge of unemployment that happened this year, it’s natural to assume that a massive surge of foreclosures will follow.

However, history is not expected to repeat itself this time.

Here are 3 simple graphs that prove why we’re not headed for another foreclosure crisis.

cash out equity.png

The unique conditions that led to the 2008 market collapse and foreclosure crisis were in big part due to cashed-out equity. With many borrowers owing more than they could afford on their homes, mass foreclosures followed. 

Today’s market, however, looks a lot different. Instead, homeowners have an abundance of equity, and lending standards are much stricter. This means that instead of foreclosing and walking away, many homeowners are in a good position to protect their investment/ 

forebarance.png

Looking at this graph, we can see that of those who requested forbearance, nearly 44% have either paid off their mortgage or opted out. It also shows that of all the homeowners in forbearance, only 80,000 are at risk of moving into foreclosures.

To drive this point home, Mike Fratantoni, Senior Vice President and Chief Economist at the Mortgage Bankers Association (MBA), said:

“Nearly two-thirds of borrowers who exited forbearance remained current on their payments, repaid their forborne payments, or moved into a payment deferral plan. All of these borrowers have been able to resume – or continue – their pre-pandemic monthly payments.”


loan to value.png

After the 2008 financial collapse, we saw the worst foreclosure crises in history. The market was flooded with homes that had defaulted on their mortgage payments, spiking all the way up to over 500,000 at the peak in 2009.

Today, we are looking at a much different story. According to Black Knight, 91% of homeowners in forbearance have 11% equity in their homes. While that may not seem like a big number, that much equity means rather than foreclose, those homeowners can not only sell their homes but walk away with gains from it.

The big question is: what happens when forbearance inevitably expires? Many lenders are offering to help homeowners create a plan for the deferred payments. There are multiple options that homeowners can pursue at this point, and with the right planning and communication with their lender, they may be able to avoid foreclosure, especially if they have equity in their homes.

Bottom Line

The reality of the situation is this: through all of the hardship Americans have faced this year, people are going to fall into foreclosure.

However, the last thing anyone wants right now is another foreclosure crisis like 2008, and there are many factors that suggest it’s not going to be like last time.

If you have questions or need help, call us! Together we can navigate the current market and help you reach your goals! 

Teresa M DiPeso & The DiPeso Group Jersey Shore Real Estate Experts
Teresa M. DiPeso
Long & Foster
Avalon/Stone Harbor/Cape May/Sea Isle/Wildwoods, NJ 08202
609-780-1434

The data relating to real estate for sale on this web site comes in part from the Broker Reciprocity program of the Cape May County Multiple Listing Service. Real estate listings held by brokerage are marked with the Broker Reciprocity logo or the Broker Reciprocity thumbnail logo (a little black house) and detailed information about them includes the name of the listing brokers.
The data relating to real estate for sale on this web site comes in part from the Broker Reciprocity program of the South Jersey Shore Regional MLS. Real estate listings held by brokerage are marked with the Broker Reciprocity logo or the Broker Reciprocity thumbnail logo (a little black house) and detailed information about them includes the name of the listing brokers.
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