AZ Foreclosure

Some concerns in Arizona that the 2020 economic downturn will lead to another foreclosure crisis like the one we experienced after the housing crash a little over a decade ago. However, there’s one major difference this time for home owners: The Congress started the Cares Act in March 2020 that helped homeowners with federally backed loans. They kept the lenders from starting foreclosure and began forbearance programs.

During the housing crash of 2006-2008, many felt Surprise Arizona homeowners should be forced to pay their mortgages despite the economic hardships they were experiencing. There was no empathy for the challenges those households were facing.

This time is real estate is different in 2020? This time there was an immediate understanding that homeowners were faced with a challenge that is not there fault. The government quickly jumped in with a mortgage forbearance program that relieved the financial burden placed on many households. The program allowed many borrowers to suspend their monthly mortgage payments until their economic condition improved. It was the right thing to do.

Forbearance programs expire, now what?

Some economic and real estate analysts are concerned many homeowners will not be able to make up the back payments once their forbearance plans expire. They’re concerned the situation will lead to an onslaught of foreclosures.

The banks and the government learned from the challenges the country experienced during the housing crash. They don’t want a surge of foreclosures again. For that reason, they’ve put in place alternative ways homeowners can pay back the money owed over an extended period of time.

Another major difference is that, unlike 2006-2008, today’s homeowners are sitting on a record amount of equity. That equity will enable them to sell their houses and walk away with cash instead of going through foreclosure.  Then re-entering the real estate market sooner, and bouncing back from there hardship sooner.  Basically a real estate led economic recovery.

Bottom Line

The differences mentioned above will be the reason we’ll avert a surge of foreclosures. As Ivy Zelman, a highly respected thought leader for housing and CEO of Zelman & Associates, said:

“The likelihood of us having a foreclosure crisis again is about zero percent.”

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