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Foreclosures remain low, for now

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Although mortgage delinquencies continue to rise, foreclosures remain low due to the moratoriums put. in place by federal and state governments in the early stages of the pandemic. This mortgage forbearance has a maximum of 12 months so it’s unlikely there will be a significant increase in foreclosures until then.

Of course, a great deal will depend on the economy, and if homeowners are able to return to work. Still, analysts don’t believe the foreclosure rate will approach the levels of the Great Recession. They also don’t believe it will be enough for housing prices to significantly drop.

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Negative Equity? Not in the Bay Area

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The Bay Area’s significant home price appreciation over the last several years translates into several positives for homeowners as the region now boasts the lowest rate of mortgage delinquencies and instances of negative equity according to a recent study by WalletHub.

Not surprisingly, the area also ranks at or near the top for highest median home price appreciation and lowest foreclosure rates.

Finally, Berkeley ranks number one for the fewest number of days to sell a house followed by San Mateo at number three.

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Foreclosures at Lowest Level in 10 Years

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According to a recent report by RealtyTrac, foreclosure starts in the United States dropped one percent in August to 45,072, a decrease 19 percent year-on-year decrease. This means that nationwide foreclosures are currently at their lowest level since November 2005.

On the other hand, while bank repossessions were down 22 percent in August when compared with July to 36,792, overall this still represented a 40 percent increase over a comparable period in 2014 and a huge increase over the pre-crisis average in 2005 of 23,119.

According to RealtyTrac the best explanation is that banks are making a concerted effort to clear out current foreclosure inventories.

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Former Home Owners Ready to Buy Again

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It’s been three years since the height of the foreclosure crisis and many former home owners are ready to re-enter the housing market. Many have spent the last few years rebuilding their credit and are ready to buy. Following are some typical “wait times” depending on the former home owners’ circumstances, of course:

  • Home owners with a foreclosure must wait seven years before they can qualify for a loan through Fannie Mae and Freddie Mac. If the foreclosure was part of a bankruptcy, the wait is only four years.
  • Home owners who experienced a short sale on a previous home must wait two years for another Fannie Mae and Freddie Mac loan.
  • Home owners looking for a Federal Housing Administration (FHA) loan must wait three years after a foreclosure or a short sale.
  • Home owners looking for a Federal Housing Administration (FHA) loan who were forced into a foreclosure because of a 20 percent cut in pay may qualify for a new loan after only one year through the FHA’s Back to Work program.

Again, circumstances vary as do lending practices but, in general, many who suffered through foreclosures during the recession are now getting closer to buying again.

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