(Photo by Matthew Henry from Burst)

The pandemic affected everyone in different ways, but one of the biggest assistances offered over the last year was that the CDC, federal and state governments issued eviction and foreclosure moratoriums to buy time and prevent tenants and homeowners from losing their homes and shelters. 

The policy for renters, which has been in place since September of 2020, prohibits almost all evictions for nonpayment of rent. It was slated to expire on June 30, 2021, but has been extended through the end of July. 

The policy for federally backed mortgages, which allowed for reduced payment plans and forbearance so that homeowners would not enter foreclosure, was also extended to July 31, 2021. 

This is the last anticipated extension of the moratorium on evictions and foreclosures. 

It’s hard to predict what will happen when the foreclosure ban ends at the end of July. But whether you are a current homeowner or a prospective one, it is worth considering how the ban on foreclosures and evictions will affect you. 

Homeowners Taking Advantage of Relief Measures from the Foreclosure Moratorium

Homeowners have been experiencing foreclosure relief from the Foreclosure Moratorium— but as the end of that looms, there is much concern ahead.

The truth is that temporary relief measures delayed an avalanche of deferred payments and interest. The eviction and foreclosure ban, while an important relief, provided only a temporary solution for most. And when the relief ends, the problem may hit even worse than before. 

Prior to the pandemic, and under normal circumstances, missed payments lead to mortgage foreclosure without the Foreclosure Moratorium. In 2020, however, missed payments did not have any impact on homeowners or on their credit. 

For some delinquent homeowners, the Foreclosure Moratorium lulled them into a false sense of security. 

Every loan is unique, and every lender is handling their repayments differently, but when the moratorium on foreclosures ends, banks and lenders will be looking to recoup their lost funds. If repayment comes abruptly, the stall will have just been a temporary pause, not a fix. And both bank accounts and credit scores will be impacted. 

Add to that all of the home repairs, maintenance, and delinquent utilities that will also need to be addressed, and the date for the end of relief will seem to be coming quite quickly indeed!

Investors or Homebuyers Searching for Deals

Investors and homebuyers should be prepared to act quickly in today’s real estate market. Many are anticipating a flood of foreclosures when the ban ends, though to be sure, it’s hard to know if this will actually come about.

Obviously, due to the foreclosure moratorium, real estate investors who sought out foreclosure properties in the past have experienced a significant drop in supply over the last eighteen months. Chances are that buyers and real estate investors can expect the inventory of foreclosure properties to increase back to normal — or even surpass —  what was considered a normal supply of foreclosure properties in past years.

Whether or not there is a rash of foreclosures, those buyers looking to take advantage and snatch up any foreclosure properties coming into the market should be prepared to make decisions and secure financing quickly. There are many buyers frustrated by the lack of inventory and increased competition, and with the increased demand for homes, that competition will likely remain, even if an influx of properties comes onto the market.

Does the foreclosure moratorium ending mean foreclosures are inevitable?

It’s hard to say for sure what will happen when the foreclosure moratorium ends at the end of July.

In an effort to help economic recovery, the Federal Reserve has announced its intention to maintain low-interest rates. If offered the opportunity to refinance, this could give struggling homeowners a better chance than expected of keeping their homes once the foreclosure ban ends. 

The process of foreclosing on homes is also usually burdensome for banks, and under normal circumstances, a foreclosure does not generate enough proceeds to cover the balance of the loan. In today’s real estate environment, however, over-market pricing may be the exception to that rule. 

So while lenders may seek alternatives, including new relief measures, work out options, and restructured payment plans to keep from foreclosing on homes, in this unprecedented and uncertain time, it is difficult to predict how the end of the moratorium of foreclosures will affect both homeowners struggling to pay their mortgages and those looking to take advantage of a flood of foreclosures in a dry inventory real estate market. 

Regardless, if you are in the market for a home in the Springfield or Burke area, keep in contact with LIST WITH ELIZABETH® to see homes as they come available. Navigating the ever-changing real estate market is easier with a trusted professional on your team.