As foreclosure moratoria expire in 2021, depending on actual and anticipated extensions, there are a couple of likely scenarios for servicers, says real estate investor and contributor to Millionacres, a Motley Fool publication, Liz Brumer .
In the end, she concludes that the new administration likely will enact public protections that will prevent a great foreclosure surge and that REO properties added to the market in 2021 would only balance out the existing supply shortage. However, Brumer's article explores two possibilities.
The market could experience "an increase in foreclosures due to the large number of homeowners still out of work" or "a decrease in foreclosures due to new policies that could extend foreclosure moratoriums," Brumer noted.
"While many signs point to an increase in foreclosure properties hitting the market, in reality, no one knows for sure," she said.
The following is what Brumer believes each situation would mean for the industry.
She notes that indicators right now point to an increase in foreclosure activity.  "It's unlikely many of those currently delinquent will be in a different situation in order to reinstate their debt obligations ..." Without significant aid, it's extremely likely foreclosure starts will start to increase steadily over the year, she added.
"If scenario 1 does play out as described, investors can expect to see an uptick in foreclosure properties hitting the market around late summer 2021 to early spring 2022," she said.
She writes that at first it is unlikely that pricing for foreclosure properties will reflect large discounts that REO investors saw after the Great Recession. With the heightened demand for real estate and values continuing to increase, the additional foreclosure properties would merely "balance demand and supply  and likely slightly lower values a bit."
Brumer says, "I personally think dramatic discounts even with foreclosure properties are unlikely in 2021."
On the other hand, investors could continue to see more of what they experienced this year, that is, high delinquencies and fewer foreclosures.
"This would happen if the new Biden administration  extends forbearance and/or foreclosure moratoriums or offers new protections that limit a lender's ability to foreclose in the coming year," she wrote, adding that in this case, "real estate values will continue to rise as demand outpaces supply."
She concludes that scenario two is more likely, but that many unknowns remain.
Read the article in full on Fool.com .