Is there a tsunami in April?

Question

A source for the banking sector said that lenders have given a significant number of borrowers forbearance to get through Covid shutdowns.But forbearance is ending.

And borrowers will need to pay all the back payments over the next 12 months. This is on top of the normal monthly debt payments. This could spell disaster for undercapitalized SFR and small MFH borrowers.

Many simply won't be able to do it, and as a result, a wave of foreclosures is on the horizon. Borrowers will sell for the price of the loan, just to get out and avoid foreclosure. If they can't, future borrowing will be more expensive and more difficult for them.

Wave breaks in April and crests in the fall.Any truth to this or...?

Bill B. · Answer

There’s some truth, IF the bank wants to foreclose and own your home. Otherwise that is only 1 of 4 or more options they have. Assuming they don’t want bad press or to own a home, they’ll just take another of the options...

https://www.experian.com/blogs...

We are in a huge bull market for housing  I assume anyone who is in financial trouble will sell, put a bunch of cash in their pocket and either downsize or become a renter. Unless they leave a market completely I don’t see it affecting houses prices very much. If a renter buys their place and they move in to a rental no inventory has been created  if they sell and downsize no inventory has been created  the only inventory you’re going to make is someone moving in with family/friends (I assume the truly desperate did that 6 months ago when they couldn’t afford utilities.)

Account Closed · Answer

This how things have worked, in waves. The market climbs as everyone gets in and the assets become less available, the assets become "more valuable" due to the demand and lack of stock.

Then, in time, the over inflation of the actual value caused by the newbies and late jumper onners crashes and almost always to a change in rules by the banks.

A "Correction" or whatever you wanna call it. Its the exact same way the stock market works, but much slower obviously.

The newbies and uniformed won't jump ship till its too late the the big guys who knew when to sell sell sell, have cash to buy up all the steep discounted deals.

To be an investor you gotta know how to roll with whatever is happening, right before its happening.

Minna Reid · Answer

There will likely be more extensions on foreclosures and forbearances, and having to pay it back over 12 months is a myth. Most lenders are offering loan mods and other workouts. In fact even if foreclosures do resume soon, it will probably take quite some time before any default inventory starts hitting the market as people will be attempting their workouts and some will just sell at a profit. Once they stop with these moratoriums I think we will see a trickle of foreclosures start and continue to grow over time. Nothing sudden though.

Jonathan Tavarez · Answer

There will be a correction for sure because of more inventory available and some foreclosures but hardly a tsunami in my opinion.  For those missing mortgage payments the house is probably  worth 20% more than last year, they can refi, get cash and keep waiting.  Inventory is so low right now that even after people are comfortable to list there homes it will take months before a significant supply hits the market and we are not even talking about stimulus checks and unemployment benefits, lots of folks sitting on cash right now.  I just don't see anything mayor happening to prices this year.

Matthew Paul · Answer

In my area of Maryland , there is no inventory to buy , houses are selling in less than a week , with multiple offers $20K to  $75K over asking with no contingencies . This isnt in just the good areas . I dont know how its going to play out . But those who are behing may be able to sell and still make a profit the way things are going around here . ( Balto city may be different ) .  They are having bidding wars in Anne Arundel county .

Jennifer T. · Answer

The 12-month forbearance period has just been extended to 15 months recently.

Banks don't require you to pay all the missed payments back in a short period of time. If your mortgage is federally backed and payments were current before the covid forbearance, they are simply added onto the end of your mortgage term.

So although tenants staying in the investment properties may not have been paying rent for the last year, the property owners haven't been paying mortgage either so it's not like they'd have a cashflow problem and are forced to sell/foreclose.

Is there a tsunami in April?

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