Missed mortgage payments are increasing. Current research from Clever real estate shows that nearly a quarter of Americans missed a mortgage payment during the pandemic, and half of homeowners have said they will run out of savings in 2020, adding pressure on homeowners to make their mortgage payments. This could signal the sign of a slowly recovering real estate market with limited capital availability.
"At high levels, lenders are likely to tighten their standards further as fewer payments come in to reduce overall risk." Francesca Ortegren, Data scientist at Clever Real Estate, tells GlobeSt.com. “This could lead to a slowly recovering real estate market as fewer people qualify for a mortgage. At the individual borrower level, more homes could go into foreclosure in the next year as people continue to miss payments. Foreclosures can cause depreciation in the value of surrounding homes that could spill over into the larger market if foreclosures spike across the country after the moratoriums are lifted. "
The future of mortgage payments – whether they go up or down – depends largely on government support. "Some of our hypotheses about next year mortgage payments depend on the passage of bills like the HEROES Act, which will expand mortgage protection," says Ortegren. "In the event that protection is extended over most of the next year, we will likely find that mortgage payments continue to be postponed." I would expect this to increase after the new year as people tend to spend a little more money during the holiday season. If the labor market rebounds strongly, this could slow down. But as long as people are unemployed, we can expect indulgence to increase. "
Without government spending, there is more uncertainty about the future – but this does not necessarily guarantee an increase in missed payments. "It's a little harder to predict what will happen if federal protection is not expanded. On the one hand, people are less likely to be less lenient if they are not guaranteed penalty-free repayment plans. In this case, people could make their mortgage payments before other payments such as credit cards prioritize, ”says Ortegren.
There is another scenario as well: homeowners struggling to make a mortgage payment might opt for forbearance if available. “On the flip side, we've seen an increase in mortgage forbearance for mortgages that are not more recently CARES. So it seems that people are choosing forbearance even when they may face penalties from their lenders. Says Ortegren. "We saw the same trend in all mortgages after the CARES law expired."