What happens after Mortgage Forbearance ends? 2021-05-19
Gulf Coast Real Estate Update
May 18th, 2021
Typical Homeowner in Forbearance Has Plenty of Home Equity
The COVID-19 pandemic’s devastating impact on the job market has left many households unable to pay their mortgages or rents. Fortunately, the speedy intervention provided by the CARES Act ensured mortgage forbearance options for homeowners who were financially harmed by the pandemic.
A typical homeowner in forbearance appears to have sizeable equity in their home, with median equity just over $100,000 and loan to value ratio at about 61%. Even after accounting for missed mortgage payments, a typical homeowner in a forbearance is estimated to have about $88,000 in equity — which is generally more than enough to cover the costs of selling a home and still have some equity left over.
There are still over 2 million borrowers in forbearance with about half of them at least 180 days behind on their mortgage payments. Among borrowers in forbearance, 2.9% are still in negative equity, or about 58,000 loans.
Mortgage rates have remained under three percent for four consecutive weeks. Consumer income and spending are picking up, which is leading to an acceleration in economic growth. The combination of low and stable rates, coupled with an improving economy, is good for homebuyers. It’s also good for homeowners who may have missed prior opportunities to refinance and increase their monthly cash flow.
