The number of American homeowners in forbearance has declined considerably as the deadline for the foreclosure moratorium draws near. The number of homeowners in forbearance declined by 189,000 as of the end of the first week of July. This is the first time a decline of this magnitude is recorded since the start of the pandemic.
Homeowners Exiting Won’t Face Foreclosures
Many Americans lost their jobs due to the pandemic, and as a result, homeowners with FHA-backed mortgages lagged in monthly payments. This prompted mortgage lenders to allow the defaulters to pause payment until the expiration of the foreclosure moratorium, happening at the end of July. Fortunately, many Americans are exiting forbearance so that they won’t be facing foreclosure.
Black Knights report that approximately 1.86 million homeowners are in forbearance. That represents about 3.5% of active mortgages. Out of nearly 300,000 forbearance plans, two-thirds had exited forbearance.
The Strong Job Market Contributed to the Exit Numbers
One of the strong factors responsible for the decline in forbearance is the solid job market reported in June. The job market witnessed tremendous growth in June, and if the growth continues till the end of July, more homeowners will exit forbearance.
Currently, forbearance exits are high, while requests have remained low. Mike Fratantoni, who works as a Chief Economist at the Mortgage Bankers Association, expects the rate of forbearance exit to increase over the next month as more jobs are being recorded.
However, not all homeowners who exited forbearance had a mitigation plan in place or paid off their mortgages as a result of the strong job market. Only approximately 24% could afford payments in their forbearance period. 8% exited forbearance as a result of selling their homes or refinancing. 14% had their accumulated amounts paid back as soon as they exited forbearance.
Forbearance exits is a huge indication that the economy is improving and that the job market is getting stronger. Hopefully, more homeowners with FHA mortgages will exit forbearance before the July 31st moratorium. Whether the foreclosure moratorium will be extended is speculative, but we do hope that it happens to prevent other homeowners from losing their beautiful houses.
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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.
