Jorge Hernandez, Weekly Newsletter 10-26-2021

Dated: October 27 2021

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Jorge Hernandez

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Editor’s Note: RISMedia’s Year-End Outlook series provides an in-depth analysis of the housing market’s leading indicators for economic health, and showcases expert insights on what’s to come in 2022. 


Despite having a banner year of feverish market activity, the real estate market could be in for a dose of reality in 2022. A post-pandemic return to normalcy will likely be underscored with its share of highs and lows as price gains slow, mortgage rates rise and the impacts of government intervention wane.


Based on recent reports by ATTOM Solutions, the market hasn’t had to wait long to see foreclosure activity pick up since the moratorium lifted in July. According to the report, default notices, scheduled auctions or bank repossessions spiked 34% in this year’s third quarter.


Experts indicate that the uptick will likely continue well into the new year following nearly a year and a half of a foreclosure moratorium.

“Foreclosure starts are very likely to rise over the next six months to a year, with the increase ranging from a tick to a torrent,” says Todd Teta, chief product officer at ATTOM Solutions.


Lender Influence

The jury is still out on the scope of the coming foreclosure spike, but it will largely depend on how lenders choose to address distressed borrowers who are behind on their payments.

In previous interviews we’ve conducted, financial institutions told RISMedia that they’d try to work with borrowers after the moratorium ended, and that appears to still be the case, according to a recent statement from Wells Fargo.


“Wells Fargo is here to help homeowners when their payment suspensions are coming to an end, and we are reaching out to engage with our customers through emails, letters and by phone,” a Wells Fargo spokesperson says, adding that the bank has stopped all foreclosure-related activity on occupied properties through the end of 2021—except in particular cases.

“In most cases, customers who were current on their monthly mortgage or home equity payments when the payment suspension started, and are ready to resume those payments, may be able to move missed payments to the end of the existing loan term,” the spokesperson continues. “Customers will need to call us to discuss potentially moving the payments to the end of the term or to review other program options for making up the missed payments.”


Additional safeguards were also put in place by the Consumer Financial Protection Bureau (CFPB) to smoothen the transition for borrowers to make payments again. The new rules essentially guide lenders on how they should approach and work with borrowers to avoid foreclosures.


The CFPB’s rules went into effect on Aug. 31 and will last until the end of 2021.

Lenders taking action against borrowers may also be contingent on how far behind the homeowners are, according to Mary Ellen Graziano, SVP at William Raveis Mortgage.

“I think the first properties that they are going to look at are the ones that are abandoned,” she says. “The others will probably work with the borrowers and see if they can come up with a payment plan and maybe even adjust the terms of the loans.”

Despite the measures taken to prevent foreclosures, increased foreclosure activity will inevitably result from current circumstances.


According to recent reports by Black Knight Inc., forbearance volumes continue to decline, with the number of active COVID-19 related plans falling below 1.6 million in September.

While mortgage delinquency rates showed signs of improvement in August, Black Knight also noted that serious delinquencies—borrowers more than 90 days behind—are still roughly triple their pre-pandemic levels.


However, according to Black Knight, a silver lining is that delinquencies are on pace to return to their pre-COVID levels by early 2022.


Remembering 2008

A sustained spike in foreclosures is a harrowing prognosis, especially for history buffs that remember the last recession.

According to Teta, foreclosures will likely show up in poorer areas first where homeowners are more likely to be in financial distress and less likely to have the money to work out deals with lenders.


“That probably will lead to some increase in zombie properties, which can generate blight and damage the appeal of neighborhoods where they crop up,” he says, noting these types of foreclosures can serve as a leading indicator  of the strength of the housing market.

“Few measures of strength have stood out more over the past several years than zombie properties, or the lack of them,” Teta continues.


Zombie properties account for one in 13,100 homes around the United States, according to recent reports from ATTOM Solutions. That is a sizable improvement from the one in 10,300 just two years ago, Teta says, adding that stock was more prominent after the Great Recession.


“This is a far cry from what happened when home values fell after the last recession, and many homeowners walked away from mortgages they couldn’t afford or no longer wanted to pay off,” Teta says.


According to Danielle Hale, chief economist at®, the looming foreclosure surge isn’t shaping up to be the death blow to the industry that economists predicted in 2020.

“When people hear that , they rightfully think back to the last time that we had a bunch of foreclosures, it had an impact on the housing market,” Hale says. “I don’t think we are going to see anything like that.”


Eric Spotswood, regional mortgage manager at Prosperity Home Mortgage, echoed similar sentiments, noting differences between the two eras.


Looking back to 2008, Spotswood notes a mix of overbuilding and no equity contributed to the downturn in the market as borrowers ended up upside down in their mortgages.

While the COVID-19 pandemic caused a recession in 2020 and a temporary lull in the market, circumstances are essentially reversed in today’s market, according to Spotswood.

“Even if someone has to have a fire sale to get out of their house, people have more equity in homes than any time in history, and they could do it,” Spotswood says. “The flexibility of borrowers who are in homes that may be in a position where they can’t afford it puts them in a point of strength.”


Brokers Weigh In

Brokers agree that an uptick in foreclosure properties hitting the market, which is still in desperate need of new inventory nationwide, could provide a needed injection of housing stock at affordable prices.


Rei Mesa, CEO of Berkshire Hathaway HomeServices Florida Properties, doesn’t find the forecasts alarming for his market, which is still in need of an inventory injection.

“I don’t see that as an issue, and in fact, I’d see that as an opportunity for buyers to be able to purchase properties because there is a lot of competition for very few listings,” Mesa says.

Based on Q3 data reported by ATTOM, Florida was among the list of states with the highest rate of foreclosures, seeing more than one out of every 2,000 properties in the foreclosure process.


The state also had a high rate of completed foreclosures during the same period.

With the amount of demand, Mesa thinks any new listings will be absorbed quickly.

According to Candace Adams, CEO and president of Berkshire Hathaway HomeServices New England, Westchester & New York Properties, the same goes for markets in the Northeast.


“You’ve got nine or 10 offers per property, and our current inventory is about 23% below last year’s,” Adams says. “We know in the state of Connecticut, we have a supply of under two months, and so let’s hope we have some foreclosures because they’ll be eaten up in about two seconds because the buyers are still out there.”

Yuri Blanco, broker/owner of RE/MAX Executives, echoed similar sentiments for the Boise, Idaho market. According to Blanco, the market continues to see inbound migration of buyers fueling demand.


“They are still interested in purchasing but just haven’t been able to lock anything in yet,” Blanco says. “I think once those come on to the market, there will be buyers to take advantage of those prices, which are usually pretty fair market value.”

The opportunity doesn’t just rest with buyers, however. Mesa also points out that agents stand to improve their business prospects in the coming months and years if they are prepared.


Part of that preparation includes brushing up on training and certifications that stand out to lenders and banks.


“Once the banks take over the properties, they are going to use those REALTORS® that the lenders are accustomed to working with or have already vetted to handle the listings,” Mesa says.


He notes that courses to improve understanding of how to work with the bank, the borrower and the potential buyer could be a boon for agents who want to capitalize on an influx of foreclosed properties.


The demand for continued education on short sales and foreclosures is already showing signs of increasing, according to Tina Lapp, head of Local Brands for Colibri Group and former president of Colibri’s Hondros College.


“We regularly survey our students for topics they are interested in, and we are seeing these topics start to become more in demand than they have been in recent years,” Lapp says, adding that Colibri offers courses on a mix of “hot topics impacting the current real estate market.”


“Our course demand follows the market, which is great to see that real estate professionals are very motivated to learn the skills that support their buyers & sellers,” Lapp continues. “We are starting to see a slight uptick in demand for topics related to short sales and foreclosures but certainly not to the extent of what we were experiencing in 2007-2009.”









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