Economists are keeping an eye on foreclosures as they mount in the wake of COVID-19, but experts predict that the surge of foreclosures won’t hit the levels of the 2008 surge.
Foreclosures: Is a Major Event Poised on the Horizon?
William R. Emmons, the lead economist at the Center for Household Financial Stability for the Federal Reserve Bank of St. Louis, developed a number of theories on the forecast for the housing market in his presentation “Housing Insecurity in the Time of COVID-19.”
Emmons suggests that the current fiscal policy will protect the housing markets and the economy from the same type of disaster that hit during the last financial crisis. While he asserts that we will see a surge in foreclosures, he notes that it isn’t expected to hit with the same force that followed the Great Recession. That isn’t to say that the situation isn’t serious, he says, as past-due mortgages have reached the same level seen at the beginning of the Great Recession. Predicting what will happen next, Emmons says, is a little more difficult due to the moratoriums that have been placed on evictions and foreclosures during the COVID-19 pandemic.
Emmons also pointed out that the current foreclosure rise will be overrepresented in the lower-income population which is “disrupting hopes that a V-shaped recovery would positively impact all segments of the population.” (Source) The supportive income that was once supporting that V has been discontinued and caused a significant interruption.
In a podcast entitled “COVID-19 and the U.S. Economy: Progress on Health and Incomes” St. Louis Fed President James Bullard took an alternate position claiming that “significant progress” had been made in managing COVID-19 and as a result, he expected the U.S. economy to grow during the third quarter. Bullard puts this potential progress down to businesses learning how to create products and services in a safer manner using technology that they already have in place.
Bullard also addressed the U.S. fiscal and monetary policies, saying that he believed that they have been exceptionally effective during the pandemic. Bullard said: “backstop lending programs stemmed an incipient financial crisis during the March-April time frame, to the point where current levels of financial stress are near pre-pandemic levels.”
Bullard suggested that now, the focus should turn to adapting to the “new mortality risk in the economy”. That lower fatalities from COVID-19 and higher household incomes will come from implementing mortality risk mitigation strategies. (Source)
With this said, however, the pandemic is still looming large two months after these economists made their predictions and the proposal of a second stimulus payment is on the books. Meanwhile, foreclosures are on the rise but tempered by the moratorium on federally backed mortgages. But what can we expect when that moratorium ends? What will 2021 bring in terms of foreclosure rates? There are so many unknowns at the moment that it can be difficult to tell what we should expect, but all things considered, I believe there will undoubtedly be a peak in foreclosures as we begin the new year. Will these be tempered once again by federal intervention? Who is to say, but the fact is that intervention cannot continue forever.
As we begin the second series of COVID-19 lockdowns in an attempt to get this pandemic under control, there is no doubt that some type of solution is needed to prevent so many Americans from losing their homes, but just what that solution is…nobody knows. In the meantime, small bandaids are doing little else than postponing the inevitable. And yes, while it is better to have a temporary reprieve from foreclosure, there needs to be a plan in place for when that reprieve runs out. At the moment, we seem to be doing little else than hitting the pause button and hoping that things straighten themselves out when the movie starts to play again. The chances of this happening? Well, they’re pretty slim.
What Can You Do?
With all of this in mind, what can you do if you are facing foreclosure? Here are a few articles that can get you started on the right track.
Need Foreclosure Help?
If you live in or around St. Pete, Florida, and need representation for your foreclosure, Weidner Law can help. To set up an appointment with us, just pick up the phone and give us a call at 727-954-8752.