Foreclosure threat grows as COVID-19, Fed says

Rising cases of COVID-19 in states such as Texas, Arizona, and California along with others have set record highs in the past week.  Some hospitals have been finding it difficult to cope and in some cases exceeding capacity. According to John Hopkins University the U.S. had a record 54,500 new virus infections on Thursday before the long holiday holiday weekend.

The unemployment federal enhancement benefits of $600 per week are set to end July 30th which will add fuel to the foreclosure dangers. The house of representatives passed a bill to extend the 600 per week payments through January, however delays by the senates two-week vacation has slowed the process.

The Fed economist for Atlanta was quoted “ The threat that forbearance will transition to foreclosures has regained power because the number of COVID-19 infections is increasing and the cares act unemployment insurance benefits will expire at the end of July.”

The enhanced unemployment benefits have helped in keeping forbearance rates lower than many analysts have forecasted. If the benefits are extended it could help temporarily stabilize the mortgage forbearance market and prevent future foreclosures.

According to a report by Black Knight the forbearance rate was 8.6% of all active mortgages in June’s final week. Economists are concerned about the new round of layoffs due to COVID-19 resurgence forcing states like California to reverse its reopening. Federal reserve chairman Jerome Powell has worn that additional relief measures are needed from Congress to avoid “long-term damage” to the economy.

It is clear that homeowners need to be educated about their options for assistance and choose the best path that helps both the short term and long term.