The sharp economic declines brought about by the coronavirus pandemic do not show signs of improving significantly in the coming months. According to an article in Politico, the initial closures resulting from the spread of COVID-19 led to the “deepest recession in decades,” and recovery has slowed due to the recent spikes in coronavirus cases across the country. Indeed, as Fed Chair Jerome Powell explained, “the pace of the recovery looks like it has slowed,” and “the current economic downturn is the most severe in our lifetimes.” As the economy struggles to rebound—and indicators suggest that a full and quick rebound is unlikely—homeowners will struggle to make mortgage payments and will face foreclosure.
According to a recent report from DSNews, the question has become just how much of a foreclosure surge we are likely to see as opposed whether one will occur. In other words, more foreclosures are likely to happen, but the question is: how many?
Foreclosure “Surge” is Now Likely
The prohibition against foreclosures on federally insured homes expired on July 31, and there has been no indication that it will be extended. Accordingly, as the DSNews report underscores, the foreclosure surge now appears likely. Looking ahead to the coming year, an ATTOM Data Solutions study has “anticipate[d] worst-, middle-, and best-case outcomes for foreclosure rates.”
What does the worst-case scenario suggest? If Congress does not act quickly and provide additional relief for homeowners who have lost their jobs and are struggling to make their mortgage payments, “residential evictions due to delinquent loan payments could double or worse in the coming year.” In this worst-case-scenario, more than 500,000 homes would be in an “initial-foreclosure-notice phase” in less than a year.
Worst-Case Scenario is Not a Given
In all likelihood, the middle-case scenario might provide a better estimate of the likely number of foreclosures if the government does provide some relief. In that case, “about 225,000 properties next spring will land between initial-foreclosure-notice phase and final resale by lenders that have taken over properties.” However, the report emphasizes that, even if Congress extends the foreclosure moratorium, that action alone will not be sufficient to prevent foreclosures and could, in some scenarios, end up causing trouble in the long run. The report explains how “foreclosure moratoriums can bring short-term relief to a market in crisis,” but “they can be ineffective and even potentially harmful when used as a long-term foreclosure prevention treatment.”
While the worst-case scenario looks bad, it is certainly not a given. Some states are also more likely than others to see a doubling and tripling of foreclosure rates than others. Foreclosure rates in the Midwest, according to the mid-level scenario, would likely double. Other regions of the U.S. would see a bigger surge in foreclosures, with rates of foreclosure activity tripling, such as in the South and West, and in some Northeastern states.
Seek Advice from an Oak Park Foreclosure Defense Lawyer
If you are at risk of foreclosure, there are options to avoid foreclosure. An experienced foreclosure defense lawyer in Oak Park can speak with you today about your options for preventing foreclosure. Contact the Emerson Law Firm to learn more about how our firm can help.
See Related Blog Posts:
Long-Term Effects of Foreclosure
Foreclosure Moratorium Re-Extended