In March 2020 we saw the full-scale launch of the Covid virus attack in the United States. Hundreds of thousands of individuals found themselves without adequate income or employment, but still required to make mortgage payments. Some landlords found themselves in a situation where their tenants were unable to make payments, placing landlords without the ability to make a timely mortgage payment themselves. This resulted in a high number of houses going into forbearance. Right now, in the United States, forbearance is still very active.
The word forbearance simply stated means, pause. When it comes to housing, this means that the mortgage company has stopped requiring the mortgagee to make monthly payments on a timely basis and they’re not reporting it to the credit bureau as a late payment. In most instances, there are also no late fees associated with the forbearance. The person in the property will be able to go down one of two roads. One, a mortgage company may do a loan modification and place the outstanding forbearance amount to the end of the loan. However, some mortgage companies will say to the mortgagee, “You owe us over $20,000, $30,000, or even $40,000. How do you plan on handling that amount?” If the homeowner doesn’t have that payment, some mortgage companies will not do a loan modification, they will simply start the foreclosure process and may end up taking the individual’s home. The mortgage company may suggest a deed in lieu of foreclosure, which simply stated means, sign the property over to us, we won’t have to foreclose on you, and you won’t have a foreclosure on your credit rating.
A study recently published stated that 25% of homeowners at the end of the forbearance will opt to put their home on the market rather than due a loan modification and resume their mortgage payments. With houses selling way over market value right now, this may be the best option for some people, and possibly a way out for them to even relocate to another city.
Due to forbearance, you will see thousands upon thousands of properties available to buy in the near future. This is the result of an individual’s personal economic situation that does not appear to have a remedy for success. As a real estate investor this gives you a huge opportunity to acquire properties over the next year and a half in every socioeconomic neighborhood. As previously stated in other articles, knowledge is power! The more you know the more you grow as an investor, and the more success you will have.
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