Forbearance Cliff September??

I’ve had a lot of folks tell me they are waiting for the Cares Act to run off and for forbearance to end in September for supply to open up. Here’s a quick article from the CFPB that shows what is actually happening in September. The deadline for applying for forbearance on FHA, USDA, & VA loans is sept. 30th, however this plan can last at least 3-6 months and there is no deadline set for Fannie Mae or Freddie Mac loans (conventional loans). Typical forbearance plans last 3-6 months.

3 Reasons I Don’t think the ‘End of Forbearance’ in September Will Have a Major Impact on the Housing Market.

  1. There is a lot of Equity in Homes. Core Logic’s Home Equity insight shows that as of first quarter 2021 only 2.6% of mortgage properties (2/3 of homes) are in negative equity, down from 3.4% last year. In contrast, in the 4th quarter of 2009 during the peak of the housing bubble 26% of mortgaged homes were underwater.

2. The Share of Mortgage Loans in Forbearance is down to 3.76%. This has been steadily decreasing for sometime. According to the Mortgage Bankers Association (MBA) of these folks in forbearance 23.5% are still making their payments, 10.8% are in initial stages, 82.7% are in extension, and 6.5% are re-entries

3. Delinquencies are decreasing Nationwide. The Core Logic Loan Performance Insights showed that the number of folks 30 days or more past due dropped 1.4% on a year over year basis. Remember that 1/3 of homes are owned outright so the number of homes that are actually in foreclosure is quite small.

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