Are We Heading Towards a Foreclosure Crisis?
COVID 19 has touched about everything in this country. As a result, there are some dire concerns and forecasts. Some are legit such as the unemployment problem in this country. What about a foreclosure crisis? The Federal Reserve Bank of Atlanta said that the danger of mortgage forbearances turning into foreclosures is rising as COVID-19 infections surge in the U.S.
They say there are three problems. First is the obvious one, and that is the rising levels or consistent new case levels. The cases are undoubtedly real. One could argue that a virus with a 98% survival rate is over-sensationalized. It doesn't matter who is right. It has and continues to create paralyzing fear, and fear shuts down economic activity. Of course, that is the number one economic (economic, not death and illness) concern with this pandemic.
The second problem is that the extra $600 a week in unemployment benefits went away. Over the weekend, Trump raised it back to $400 a week through executive order. According to the Federal Reserve Bank of Atlanta, that risk is off the table for now.
The third concern is another round of layoffs due to the resurgence of COVID-19 forcing states to re-shut down. At least until November, there are slight chances of that happening with an election in less than 100 days.
There are only 8.9% taking advantage of the 12-month mortgage forbearance program created by the CARES ACT. Forbearance means that the mortgage holder can forego up to 12 months without paying the premiums of a mortgage without risk of foreclosure and risk to their credit scores. Even if 2/3rds of those mortgages ended up in the fore-closer, I would suspect that number is on the lower side for a potential crisis to occur.
So are we headed for a foreclosure crisis? There is not enough data to make that call. As long as the government continues to bail out America, these future problems get pushed out to the future and maybe long enough to decrease a good percentage of those who are unemployed. However, here are the questions:
Will the virus outlast the bailout strength of the government?
How are you going to get the tens of millions back to work?
These are daunting questions whose answers could reshape America more than it already has.