By Aahoo Pourang : For struggling homeowners in California, the safety net created by Governor Newsom was a relief after being hit by the COVID-19 economic shutdown. Now that California will begin to reopen mid-June, people are concerned that after the safety net expires, if 2021 will see a mass number of foreclosures in California.
With the Coronavirus Relief and Economic Security Act (CARES), homeowners were previously provided foreclosure and eviction protections from 2020 through March 31, 2021, which also halted evictions from these properties.
People fear that once forbearance runs out, a market crash like 2008 will repeat and Southern California will be hit by a huge wave of foreclosures. Although when the protections end, there will be an overwhelming number of foreclosures, we may not see a crash similar to 2008 because homeowners have become more financially stable, holding greater equity in their homes.
And while there is an extension until June 30, 2021 on foreclosure forbearance, there are talks about the federal government interested in halting foreclosures altogether until January 2022 to throw yet another lifeline to American homeowners. Housing experts and economists are saying that it won’t be enough to prevent the millions of foreclosures after everything resumes back to normalcy and are warning against the 2022 extension.
If approximately 1.7 million borrowers exit forbearance programs they are currently in, most mortgage holders will have to re-enter payment agreements with their mortgage services. The CFPB proposed to give millions of homeowners behind on their mortgage payment more time before their home is forced into sale, with the driving principle to give struggling homeowners the opportunity to “explore ways of getting current on their loans and avoiding foreclosure if possible”.
Although halting foreclosures until 2022 seems like the ideal solution, it may create less-than-ideal economic complications in the near future. The National Consumer Law Center (NCLC) said in a press release that halting foreclosures until 2022 makes it more difficult for homeowners to know they should be “seeking a permanent solution sooner”, and at this point, to weigh whether foreclosure is the best option to sell their home and downsize. Some economists argue that while they are sympathetic that Americans will end up losing their homeowner status, that it is a reality of an unforeseen situation.
This is also a concern for the mortgage industry, some believing that the “proposal would force servicers to violate their contractual agreements with mortgage investors.” Borrowers would be at immediate risk once existing forbearance in 2022, and that this proposal would offer nothing beneficial.
Homeowners would have to wait until June 30th of this year to know how to move forward, but in the interim period weigh the possible options on what is best for their own financial situation.
For more market updates call Mina Pourang, “Better Loans Corporation’s” in-house loans and real estate expert at (949)202-7484. When you need the best, Call Mina Pourang!
Resources: firstteam site, marketwatch site, forbes magazine, CA Government website