Economic concerns are growing as the effect of the coronavirus begins to cross the country. In anticipation of an increase in mortgage foreclosures, government and independent regulators are working on plans to avoid another foreclosure crisis. These unfolding events may impact family finances and a foreclosure defense.
Mortgage delinquencies have been at near record lows because lenders substantially restricted credit after the subprime mortgage crisis. Strong home values, solid employment and high equity also contributed to this positive mortgage situation.
It takes 90 days for a mortgage to become officially delinquent. But regulators and industry anticipate that there will be a large increase in foreclosures after 90 days as the country continues to absorb the economic impact of the coronavirus.
Fannie Mae and Freddie Mac have loan forbearance programs designed to assist anyone with financial hardship from the virus such as job loss. The director of the Federal Housing Finance Agency, the agency which oversees these agencies and acts as the government’s mortgage insurer, anticipates that new responses will be needed if these economic consequences continue into the summer.
The FHA may also have to deal with delinquencies because it backs down payment loans for borrowers with low credit scores who are more likely to face the consequences of any income disruption. Most FHA lenders are not banks, and do not have their liquidity. When nonbank lenders grant forbearance to their lenders, they still must pay their investors but lack these funds.
As part of its mortgage stimulus, the US Treasury will contribute $200 billion into mortgage-backed bonds to stabilize mortgage rates. Currently, however, there are no other plans designed for current borrowers.
The stimulus plans under consideration in the Congress do not contain a broad suspension of mortgage payments at present. Lenders are also seeking more guidance from the FHA.
There are still many legal options to help fight foreclosure. An attorney can help assess your situation and seek a possible solution.