Avoid Mortgage Foreclosures, See Options For Homeowners Who Might Be At Risk

Foreclosure activity is likely to remain slightly elevated over the next three months after rising in August, according to a new report from ATTOM, a mortgage data company and parent company of foreclosure marketplace RealtyTrac.

Foreclosure filings – including default notices, scheduled auctions and bank repossessions – increased 27% from July to 15,838 filings in August, according to the August 2021 U.S. Foreclosure Market Report. This is up 60% from last year.

"As expected, foreclosure activity increased as the government’s foreclosure moratorium expired, but this doesn’t mean we should expect to see a flood of distressed properties coming to market," RealtyTrac Executive Vice President Rick Sharga said. "We’ll continue to see foreclosure activity increase over the next three months as loans that were in default prior to the moratorium re-enter the foreclosure pipeline, and states begin to catch up on months of foreclosure filings that simply haven’t been processed during the pandemic."

If you are at risk of going into foreclosure or struggling to make mortgage payments, consider taking out a mortgage refinance to help lower your monthly payments while interest rates remain at record lows.

CFPB rule still holding off foreclosures
Despite the slight uptick as the foreclosure and eviction moratoriums end, residential foreclosures will remain suppressed through the remainder of the year, Sharga explained. "It’s likely that foreclosures will remain below normal levels at least through the end of the year," he said.

That’s because the Biden administration put a new servicing rule in place through the Consumer Financial Protection Bureau (CFPB) that would hold off most foreclosures until 2022. The rule, which went into effect at the end of August, prevented mortgage servicers from offering a loan modification plan to increase the monthly payment for a homeowner emerging from their forbearance program. It also prevents them from extending the loan term longer than 480 months and allows them to add on missed payments to keep homeowners from falling into delinquency. The CFPB will continue to add additional restrictions on foreclosures through the remainder of 2022 to protect homeowners.

Options for homeowners to avoid foreclosure
Currently, the CFPB’s new servicing rule creates more options for homeowners to avoid foreclosure. If you are looking for ways to avoid foreclosure and get caught up on your monthly mortgage payments too, here are a few places to start:

Loan modification
Under the new servicing rule, mortgage servicers must work with homeowners to get them back on track with their monthly payments. Through a loan modification, borrowers can lower their costs by reducing their interest rates or changing loan terms. Homeowners can reach out to their loan servicer to discuss their options.

Mortgage refinance
Refinancing options could also help lower monthly payments with today’s sub-3% interest rates. There are even new options made available by the Federal Housing Finance Agency (FHFA) through Fannie Mae and Freddie Mac for low-income borrowers or homeowners who missed payments due to a COVID-19-related hardship.

Sell your house
While it is not an ideal option, homeowners who cannot use other methods to begin paying their mortgage payments may want to consider selling their homes rather than going into foreclosure. Home prices are growing at record rates and could leave homeowners with multiple profit levels if they choose to sell their homes.