Are We About to See a New Wave of Foreclosures?

    Are We About to See a New Wave of Foreclosures? | Simplifying The Market

    With all of the havoc being caused by COVID-19, many are concerned we may see a new wave of foreclosures. Restaurants, airlines, hotels, and many other industries are furloughing workers or dramatically cutting their hours. Without a job, many homeowners are wondering how they’ll be able to afford their mortgage payments.

    In spite of this, there are actually many reasons we won’t see a surge in the number of foreclosures like we did during the housing crash over ten years ago. Here are just a few of those reasons:

    The Government Learned its Lesson the Last Time

    During the previous housing crash, the government was slow to recognize the challenges homeowners were having and waited too long to grant relief. Today, action is being taken swiftly. Just this week:

    • The Federal Housing Administration indicated it is enacting an “immediate foreclosure and eviction moratorium for single family homeowners with FHA-insured mortgages” for the next 60 days.
    • The Federal Housing Finance Agency announced it is directing Fannie Mae and Freddie Mac to suspend foreclosures and evictions for “at least 60 days.”

    Homeowners Learned their Lesson the Last Time

    When the housing market was going strong in the early 2000s, homeowners gained a tremendous amount of equity in their homes. Many began to tap into that equity. Some started to use their homes as ATM machines to purchase luxury items like cars, jet-skis, and lavish vacations. When prices dipped, many found themselves in a negative equity situation (where the mortgage was greater than the value of their homes). Some just walked away, leaving the banks with no other option but to foreclose on their properties.

    Today, the home equity situation in America is vastly different. From 2005-2007, homeowners cashed out $824 billion worth of home equity by refinancing. In the last three years, they cashed out only $232 billion, less than one-third of that amount. That has led to:

    • 37% of homes in America having no mortgage at all
    • Of the remaining 63%, more than 1 in 4 having over 50% equity

    Even if prices dip (and most experts are not predicting that they will), most homeowners will still have vast amounts of value in their homes and will not walk away from that money.

    There Will Be Help Available to Individuals and Small Businesses

    The government is aware of the financial pain this virus has caused and will continue to cause. Yesterday, the Associated Press reported:

    “In a memorandum, Treasury proposed two $250 billion cash infusions to individuals: A first set of checks issued starting April 6, with a second wave in mid-May. The amounts would depend on income and family size.”

    The plan also recommends $300 billion for small businesses.

    Bottom Line

    These are not going to be easy times. However, the lessons learned from the last crisis have Americans better prepared to weather the financial storm. For those who can’t, help is on the way.

    Content previously posted on Keeping Current Matters

    Rajeev Vashist

    Serving Northern Virginia real estate needs for over 27 years – Rajeev Vashist has built his reputation through surpassing his clients’ expectations at every turn. Whether they are buying or selling, his knowledge of the local market is unparalleled and has proven to be advantageous in every transaction for his clients. Rajeev provides each client with extraordinary customer care and services, always implementing –cutting-edge technology in the process, which has earned him raving reviews from his past clients. His passion for real estate and focused determination has helped him excel in his career and afforded him with numerous achievement awards. Rajeev is recognized for consistently placing in the top one percent of all real estate professionals in America. Specializing in navigating the ups and downs of the Northern Virginia Real Estate market, his integrity, dedication, insight, and hard work are only a few of the reasons that over 98 percent of Rajeev’s business comes from repeat clients and referrals. His clients acknowledge the value of his unending, local expertise, negotiation skills, and exceptional personal attention– the level discriminating clientele expect and deserve.
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