As government and private-sector programs for helping homeowners with financial difficulties delay monthly mortgage payments start expiring, foreclosures are rising dramatically. But that increase is coming off of a very low baseline, and foreclosures still are far below pre-pandemic activity.
New foreclosures, also known as starts, usually number around 40,000 per month. They fell to as low as 3,000 to 4,000 in the first year of the pandemic, when forbearance programs were in full force.
“Despite the increased level of foreclosure activity in September, we’re still far below historically normal numbers,” said Rick Sharga, executive vice president at RealtyTrac, an ATTOM company.
September foreclosure actions were almost 70% lower than they were pre-pandemic. Total foreclosure activity is also still 60% lower than it was a year ago.
“Whether the increase is a prelude to a more serious problem, or just a return to normal levels of foreclosure is one of the bigger debates going on inside the industry right now,” said Sharga.
Foreclosure numbers should stay relatively low because of aggressive modifications by lenders and also because of high levels of home equity, due to the recent housing boom and consequently high home prices. Prices were up over 18% year over year in August, according to CoreLogic.
“I think the ‘forbearance cliff’ will be minimal,” said David Stevens, former CEO of the Mortgage Bankers Association and former FHA commissioner in the Obama administration.