Pandemic Backlog Will Create A Serious Foreclosure Spike In The Coming Months
Expect a foreclosure spike in the coming months. Lenders have a backlog of distressed mortgages dating back to the height of the pandemic. Consequently, they are now about to start foreclosing. However, they are not expect to be as high as the foreclosure rates from days following the financial crisis.
Auction.com is predicting the the foreclosure spike after it did a survey of some 50 Auction.com clients. These clients include private-sector mortgage servicers and government-sponsored enterprises (GSEs). The survey shows that nine in 10 mortgage servicers expect their foreclosure volume to increase over the next 12 months.
The survey queried Auction.com clients about their expectations for outcomes of seriously delinquent mortgages. They specifically targeted homeowners who have lost the protections of forbearance programs. The programs were created in the early days of the COVID-19 pandemic. That loss of forbearance protection is expected to be the primary driver of future foreclosures.
Auction.com CEO Jason Allnutt told HousingWire:
Now that most pandemic-era foreclosure protections have expired or are winding down, it’s clear that the pro-active response to the pandemic by mortgage servicers helped to avoid a feared foreclosure wave triggered by the crisis. Most in the default servicing industry expect to see foreclosures gradually increase over the next year. They are expecting a higher percentage of delinquent mortgages to avoid foreclosure than the historical average prior to the pandemic.
The survey shows some 23% of Auction.com clients expect their severely delinquent inventory to go to foreclosure auction in the following 12 months. Auction.com reports. However, 20% of the clients surveyed expect more than 30% of delinquent inventory in foreclosure over the next 12 months.
The most likely foreclosure increases will be among government-insured mortgages and on properties located in the Midwest, according to survey respondents.