Have you heard about Forbearance and the Foreclosure protections our government put into place during COVID and recently extended? Have you thought about how this will affect our real estate market in the near future once these policies are lifted? Let’s talk about it! Welcome back to Keeping it Real Estate!

Let’s start off by defining mortgage forbearance

Forbearance is when your mortgage lender allows you to delay payment of your mortgage or lower payment of your mortgage. You will have to pay it back later but it offers immediate alleviation for a brief time. The government forced lenders to offer forbearance to those suffering economic hardship due to COVID. 

And then the government put a foreclosure moratorium policy into place especially here in California, that stops lenders from proceeding with any foreclosure process. In English, homeowners can stop paying and the banks cannot foreclose. 

Now at some point, I think towards the end of this year or maybe next year even that’s going to be lifted. So the question is, will our real estate market be flooded with foreclosure inventory that could possibly cause a market bubble to pop?

In my opinion, I believe that even those in trouble on their mortgages today are not going to sit around and wait for their home to foreclose. They will have a lot of equity to lose and although some will be in denial during the foreclosure process and end up losing their house, most will be proactive and sell their house for a profit before losing it. 

Many of the Americans that suffered financial hardship were small business owners- they are savvy, they are financially aware- they are not uneducated. If there are no other options to help them keep the home available they will sell.