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The End Of COVID-19 Mortgage Forbearance

Updated: Jul 21, 2021

The COVID-19 pandemic has been tough on millions of homeowners throughout North Carolina and the rest of the US. Many people lost their jobs or were furloughed, and many small business owners struggled to get by. It was difficult for people to pay their monthly mortgage payments and other necessary bills. Countless homeowners were worried that they would default on their loans.

How Mortgage Forbearance Has Helped Homeowners Throughout the Pandemic

Thankfully for many homeowners, the federal government offered relief efforts, including stimulus payments and the CARES Act’s homeowner protections. Homeowner protections included eviction moratoriums, reduced monthly payments, and mortgage forbearance. Millions of Americans have taken advantage of COVID-19 mortgage forbearance – in May 2020, 7% of mortgage accounts were in forbearance. Each month, these homeowners have been able to either reduce or completely pause their mortgage payments. As of July 2021, the mortgage forbearance rate has decreased to 3.76%, which is much lower but still encompasses 1.9 million homeowners.

Now that the pandemic seems to be drawing to a close, many relief efforts are expiring, and COVID-19 mortgage forbearance is no exception. The mortgage forbearance period has been extended throughout the COVID-19 pandemic and was previously set to expire at the end of June 2021. Right now, as of the writing of this article in July 2021, the forbearance period is set to expire at the end of September 2021. Homeowners who are in forbearance are going to have to start paying back their loans again in the near future.

COVID-19 Mortgage Forbearance Set to Expire in September 2021

According to the FHA’s June 2021 statement,

“FHA is extending the time period for homeowners to start new forbearance plans to September 30, 2021. Homeowners who have not previously been in COVID-19 forbearance can request this pause or reduction in mortgage payments. The COVID-19 Forbearance for homeowners who newly request forbearance assistance between July 1, 2021, and September 30, 2021, is for six months.”

Right now, borrowers can still request forbearance if they need it. Those already in forbearance have a few more months to avoid foreclosure.

What This Means for the NC Real Estate Market

It’s difficult to know exactly what will happen to the NC real estate market when pandemic forbearance ends. There’s a possibility that the end of these benefits will lead to more foreclosures or more people willing to sell their homes, which could drive up inventory and reduce real estate prices. Federal regulations do not allow banks to ask for repayment of missed payments in a lump sum, instead, the mortgage can either be extended or the monthly payments can be increased.

In our current situation, it seems unlikely that we’ll see a major real estate crash. That’s because demand is so high. With so many buyers out there, it is not likely that the market will completely crash even if homeowners do start to go into foreclosure or sell their homes at a higher rate. And since most of the jobs that were lost during the pandemic have been re-gained, most people are in a much better financial position than they were a year or so ago.

What This Means for Your Clients

That being said, it is likely that inventory will go up and prices will decline somewhat, giving buyers a better chance to get a home with less competition from other buyers. Sellers will likely still be in an okay position to sell, but their homes may not fly off the market quite as quickly as they have been.

At this point in time, it may be wise to advise your buyer clients to wait a few months, if they can, to settle on a home. They may be able to get a better deal and have a few more options pretty soon. Alternatively, if you have any clients that have been on the fence about selling their home, the time is now. There is a good chance that the market will peak soon, and it may be years before they can get as much for their home as they may get if they sell it now. Additionally, sellers are in a very advantaged position right now where they can sell their homes with few contingencies and really set the tone for the transaction, which might be gone soon as well.

Conversations like this come up often in our classes because all of our instructors are active agents with real-world experiences to share with you during your classes and that makes a world of difference! It's one of the number one reasons why our students keep coming back!

Keywords: nc real estate market, covid-19 mortgage forbearance

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