Why the Forbearance Program Changed the Housing Market, According to Entrepreneur Andrew Shader
The Great Recession brought about a crash in the real estate market and general uncertainty about the economy for millions of people.
The fear that this might happen again during the COVID-19 pandemic inspired the federal government to institute a forbearance program. Andrew Shader explains why this program worked well for so many American homeowners.
How the Forbearance Program Helped
During the early months of the pandemic, many people lost their jobs or saw their hours reduced. These changes made it harder for homeowners to keep up with their mortgages. The federal government instituted the forbearance program to offer relief to those households, ensuring families could stay in their homes.
Rather than facing foreclosure, homeowners had more options for working with lenders on their overdue accounts. Today, those homeowners who took advantage of the forbearance program have new arrangements with their lenders. If they aren’t fully caught up on their mortgage payments, they have a new repayment plan in place.
While 36.4% of borrowers are fully caught up on their mortgage payments, 45.2% have worked out new repayment plans that will allow them to keep their homes. Only 18.4% of borrowers are still in crisis and in danger of foreclosure.
What Does the Future of the Housing Market Hold?
Fears of another real estate market crash were curtailed due to the forbearance program. While the mortgage moratorium has ended, that federal program saved millions of homeowners. As a result, far fewer foreclosures are coming to the market than had been expected.
Lenders have also contributed to preventing another housing bubble by redesigning their lending practices. By instituting stricter policies for qualifying buyers, they have ensured more borrowers can repay their loans. This has also reduced the number of foreclosures this year.
Since lenders are making sure their customers are buying homes they can realistically afford, it has been easier for homeowners to build equity at a faster pace. This has also helped reduce the number of foreclosures economists expect to see.
Rather than facing foreclosure, homeowners can sell their homes and use their equity to pay off their mortgage balance.
What Does This Mean for Buyers?
Stricter borrowing terms have remained in place even though the forbearance program is no longer available to new borrowers. This means that lenders continue to make sure their customers really can afford their new homes.
A reduction in foreclosures instills more confidence among buyers and lenders, and it keeps the market stable for those wishing to sell their homes.
Since most buyers have homes that fit into their budgets, they find it easier to build equity and save money. Even when a recession or an economic downturn strikes, these homeowners will find it easier to afford mortgage payments. While they may still struggle in a recession, they won’t have to worry about losing their homes.
Who Is Andrew Shader?
A graduate of Florida State University, Andrew Shader has developed a successful career as an entrepreneur with a passion for real estate investment. Through years of investing, he has developed skills for increasing the real value of homes rather than relying on market changes. This practice has helped Andrew become an expert in real estate investing and an insightful market analyst.
