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What Happens When Forbearance Programs Expire?

mortgage loans performanceMoratoria and the CARES Act have effectively halted foreclosure activity—those filings are at an all-time low—but the numbers "are artificially low," analysts say. Some predict a significant "burst" once government programs expire. 

ATTOM Data Solutions, which collects and analyzes foreclosure data, released its Q3 2020 U.S. Foreclosure Market Report. It revealed a total of 27,016 U.S. properties with foreclosure filings including default notices, scheduled auctions or bank repossessions, in the third quarter, down 12% from the previous quarter and down 81% from a year ago to the lowest level since it began tracking quarterly filings in the beginning of 2008.

The study also indicated there were a total of 9,707 U.S. properties with foreclosure filings in September 2020, down 2% from August and 80% from September.

Lenders started the foreclosure process on 15,129 properties in Q3, that's the 21st quarter in a row to show a decrease in foreclosure starts.

Nationally, one in 5,048 properties had a foreclosure filing. Those with the highest rates last quarter were South Carolina, Illinois, New Mexico, New Jersey, and Delaware.

Those properties foreclosed on in Q3 spent an average of 830 days in the process. That's up from 685 days in Q2 but down a bit from 841 last year at this time.

“Foreclosure activity has, for all intents and purposes, ground to a halt due to moratoria put in place by the federal, state and local governments and the mortgage forbearance program initiated by the CARES Act,” said Rick Sharga, EVP of RealtyTrac, an ATTOM Data company. “But it’s important to remember that the numbers we’re seeing today are artificially low, even as the number of seriously delinquent loans continues to increase, and that we’ll see a significant—and probably quite sudden—burst of foreclosure activity once these various government programs expire.”

Furthermore, lenders repossessed 6,076 U.S. properties through foreclosure (REO) in Q3, down 22% from the previous quarter and down 82% from a year ago to the lowest level since ATTOM began tracking.

"We’ll certainly see more repossessions by lenders once the foreclosure moratoria have ended, but maybe not as many as people might expect” Sharga noted. “Given the record amount of homeowner equity—over $6.5 trillion—it seems likely that many homeowners in financial distress will opt to take advantage of strong demand among homebuyers and sell their property rather than risk losing it to a foreclosure auction."

For the full report, visit ATTOM Data Solutions.

About Author: Christina Hughes Babb

Christina Hughes Babb is a reporter for DS News and MReport. A graduate of Southern Methodist University, she has been a reporter, editor, and publisher in the Dallas area for more than 15 years. During her 10 years at Advocate Media and Dallas Magazine, she published thousands of articles covering local politics, real estate, development, crime, the arts, entertainment, and human interest, among other topics. She has won two national Mayborn School of Journalism Ten Spurs awards for nonfiction, and has penned pieces for Texas Monthly, Salon.com, Dallas Observer, Edible, and the Dallas Morning News, among others.
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