Many homeowners are in danger of losing their homes in the U.S. as they continue to lag on mortgage payments. If this continues, we may see the real estate industry threatened.
Homeowners Are 90 Days or More Behind In Mortgage Payments
The American Enterprise Institute reports that homeowners with FHA-backed mortgages are late on their payments, with many 90 days or more behind. Out of 7.6 million Federal Housing Administration mortgages across the country currently, approximately 14.7% lagged on payment in May, a slight increase from April. 10.5% out of the 14.7% were seriously in default.
This statistic doesn’t exclude loans in forbearance. When the pandemic was at its peak, lawmakers and federal bodies developed some programs that gave homeowners payment relief. These programs extended to September 2021 to allow homeowners to make requests to pause their payments from between six to eighteen months.
The forbearance program seemed to have paid off as the rate of requests from Americans dropped significantly, most especially in recent weeks. However, FHA borrowers, primarily the Blacks, still face a huge problem, as the percentage remains strong. Now, the big question is, what would happen to these borrowers if they run out of time in forbearance?
Borrowers Would Have to Sell Their Homes to Pay Off Mortgages
These borrowers would want to modify their loans to make the payments more flexible and avoid foreclosure, but this might not be given because it’s merely hypothetical. Edward Pinto and Tobias Peter of the American Enterprise Institute point out that if the lender doesn’t develop something concrete to mitigate the delinquency, debtors will have no other option than to sell their house.
Fortunately, home prices have been in a rapid uptrend since the year began. Therefore, these borrowers won’t be selling their homes for a low price. The money gotten would be enough to pay off their mortgage and cover all other expenses. Most importantly, they would prevent foreclosure.
On the other hand, borrowers who cannot sell their homes will face foreclosure or another short sale. One thing remains clear – these homes will add to the supply market in those cities. Therefore, a buyers market would emerge. Additionally, the concentration of FHA loans in delinquency would be astronomical.
The top four cities with the highest FHA-loans delinquencies in May are Atlanta (17.4%), Houston (18.8%), Chicago (19.1%), Dallas (15.8%).
While the sold homes would add to the supply market, these borrowers might not have enough to buy another home after paying off their mortgages. Therefore, a homeless crisis could occur. Not forgetting that demand will continue to escalate.
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The Power Is Now Media is an online multimedia company founded in 2009 by Eric L. Frazier, MBA, and is headquartered in Riverside, California. We are advocates for homeownership, wealth building, and financial literacy for low to moderate-income and minority communities. The Power Is Now Media corporate office is located at 3739 6th Street Riverside, CA 92501. Ph: 800-401-8994 Website: www.thepowerisnow.com.
Published by Eric Lawrence Frazier, MBA.