Bankers and brokers predicted the pandemic-induced closings and layoffs that began in spring 2020 would greatly boost home foreclosures and mortgage defaults, but that did not happen.

Yet.

Federal and state pandemic aid, including unemployment benefits, economic checks, foreclosure moratoriums, and late mortgage payments, all helped keep defaults and foreclosures down, lenders and brokers say. At the same time, Maine home sales and prices have continued to surge across most of the state, providing another safety net for troubled homeowners.

But two upcoming milestones will determine whether the aid and hot housing market can help keep you in trouble.

The state and federal foreclosure moratoriums will expire on July 31, and the final forbearance or late loan payments will end around September. Some experts say either event could trigger foreclosures, while others say the hot housing market gives owners a chance to sell before it happens.

"When you haven't made a payment in 18 months it's really difficult to get back into some kind of cash flow," said Russell Cole, President and CEO of CUSO Home Lending in Hampden.

He expects a "slightly higher default rate" for borrowers yet to be lenient, but said he remains cautiously optimistic that owners can avoid foreclosure.

Most forbearances lasted two to four months, but some were extended to 18 months one or more times, Cole said. CUSO handles home mortgages for approximately 25 Maine credit unions.

According to the Mortgage Bankers Association in Washington, DC, 1.75 million homeowners nationwide are still indulgent, up from 4.3 million last summer. There were no state collapses. Cole estimated that about half of the forbearances were unnecessary in Maine, as many homeowners requested at the start of the pandemic when there was much uncertainty about the economy.

When the pandemic restrictions went fully into effect in April 2020, "there was an instant 'oh no, what's going to happen,'" said Renee Smyth, chief marketing officer at Camden National Bank.

But with unemployment and stimulus benefits, she said the bank "did not see what we expected a year ago".

Maine's strong economy and comparatively low unemployment rate were also factors that helped homeowners, Smyth said. Maine's unemployment rate was 5.3 percent in June 2020, about half of the total US total, and 4.8 percent this June, compared with 5.9 percent for the country, according to state data.

However, some homeowners are still out of the woods. About 5.6 percent of the more than 118,000 loans serviced in Maine at the end of March were 30 days or more past due, and 1.4 percent of borrowers were in foreclosure, according to the Mortgage Bankers Association.

The default rate of loans that are 30 days or more overdue has fallen in Maine from a pandemic high of nearly 7.3 percent in late June 2020 to 5.6 percent in March, the banking association said.

Bangor Savings Bank is seeing a slight spike in defaults, with $ 1.1 million in loans being overdue for 30 days or more in June, said Jim Donnelly, the bank's chief commercial officer. That's an increase of $ 740,000 in June 2019. Even so, the majority of borrowers are paying on time, he said.

Bangor Savings, along with CUSO and Camden National, said they haven't seen a surge in foreclosures and are working through forbearances to get borrowers into a payment program they can afford. Borrowers must continue to pay for the months they have delayed their mortgage payments. Lenders usually add these months to the end of their existing loan and sometimes add a fee.

Donnelly said Bangor Savings now only excludes vacant or abandoned properties as it complies with moratoriums. There were 11 active foreclosure cases in June 2021, up from 24 in June 2019.

Brit Vitalius, founder of the Vitalius Real Estate Group in Portland, does not expect a wave of foreclosures in the fall due to the strong real estate market. Maine home sales in June rose 15 percent year-over-year and the average sales price nationwide by 25 percent to $ 210,000, according to figures released Thursday by the Maine Association of Realtors.

This is very different from the Great Recession when the real estate market collapsed and many homeowners found they owed more than their home was worth, he said.

"The value is there. If an owner gets into trouble, they can sell their house and probably make money because it's up 20 percent year over year, "Vitalius said. This is true across the state, as rural areas are also seeing strong property sales and prices.

The majority of borrowers who have canceled a deferral have already fully resumed their mortgage payments or modified their loan, said Adam DeSanctis, spokesman for the Mortgage Bankers Association. He agrees with Vitalius that many troubled borrowers can benefit from rising equity and tight home supplies.

"Moving is certainly a better option than the borrower's foreclosure hit," DeSanctis said.

source https://seapointrealtors.com/2021/07/26/pandemic-related-home-foreclosures-didnt-spike-as-expected-but-that-could-change-soon/

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