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Foreclosure Filings Are Off the Charts. What Does It Mean for You?

Foreclosure Filings Are Off the Charts. What Does It Mean for You?

Whether you’re a homeowner looking to sell or an investor looking to buy, the recent uptick in real estate foreclosure filings has raised some concerns as well as some eyebrows.

As of May 1, 2022, these filings have increased by 132 percent compared to 2021. Active foreclosures increased by over 7,000 in March.

According to technology service provider Black Knight, those numbers represent the first year-over-year increase in foreclosure filings for almost ten years.

Foreclosure is a legal process whereby your mortgage company attempts to obtain the ownership rights to your home by repossessing your property and selling it.

What Triggers the Mortgage Foreclosure Process?

Over 78,000 properties in the U.S. experienced a foreclosure filing early in 2022. According to the real estate analytics company ATTOM, that’s 39 percent more foreclosure filings than the previous quarter and 132 percent more filings than last year.

Serious mortgage delinquencies that are overdue by at least 90 days have increased by 70 percent since the pandemic appeared.

Foreclosure filings are legal acts initiated by mortgage lenders. The lenders want the right to sell a delinquent property at auction and recover their losses.

A loan goes into default when a borrower misses a specific number of monthly payments or fails to meet other terms and conditions spelled out in the loan agreement.

Rick Sharga, executive vice president at ATTOM, tells us that just because foreclosure filings were spiking during the first quarter of 2022, we shouldn’t be too upset about it.

Mr. Sharga explained that mortgage servicers are simply catching up on a foreclosure backlog that developed during the pandemic. Experts are trying to reassure everyone that a minor foreclosure uptick is not a serious cause for concern.

“These delinquency rates are so low that they’re not having much effect on the overall housing boom” says Jeff Ostrowski, a Bankrate analyst.

Although the housing market is desperate for new inventory, Mr. Ostrowski believes that the current volume of foreclosures will be enough to satisfy potential homebuyers and survive the inventory crunch unscathed. The only problem is that foreclosed properties are currently few and far between.

What Is the Upshot for Home Buyers and Sellers?

Experts warn that you’re not likely to snag a deal on a foreclosure property anytime soon with the demand for homes so high. Competing buyers are bidding up the prices for all homes, including foreclosures. Nevertheless, it’s still a seller’s market.

If you’re looking to buy and considering a foreclosure property, think carefully before making an offer. A serious delinquency can destroy your credit rating and potentially result in default and foreclosure.

On the upside, home prices have been steady. Homeowners looking to sell should have no trouble finding buyers, and many people will sell their homes instead of losing them. On the downside, a homeowner without a home must now negotiate with a pricey rental market.

In January of 2022, new data revealed a seven-fold increase in foreclosure starts. There is also a sizeable backlog of mortgage loans that are either in loss mitigation or past due after completing loss mitigation.

Many of those properties will eventually become foreclosures.

Experts say the current housing market is still going full steam ahead. That perception is fueled by mortgage interest rates that are still at record lows. Recently though, even the low interest rates have themselves been “ticked up.”

If you find a foreclosed property that catches your eye, schedule an inspection to assess the physical condition of the property and the cost of any repairs.

Homeowners who remain in forbearance into 2022 are at risk for financial hardship. When forbearance ends, homeowners will be less likely to resume their payments and more likely to progress from forbearance to foreclosure.

Given today’s sparse housing inventory, homeowners who buy foreclosures will pay through the nose for them. On the other hand, transactional volume for real estate service companies will escalate. Any remaining foreclosures will sell like hotcakes.

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