(UnitedVoice.com) – In February, America was enjoying one of the best economic times in decades. Jobs were plentiful as companies had more positions available than people to fill them, wages were on the rise, and many Americans felt good about their financial situations. That was before COVID-19 exploded a ballistic missile in the heart of the economy as governors closed businesses and issued quarantines. America went from a 50-year low unemployment rate in February to an 80-year high in April.
Now, there are questions about the looming mortgage default crisis that could make the Great Recession look not so “great.”
While the economy continues to improve at a snail’s pace, the damage is already baked in. Since the start of the shutdowns, over 56 million Americans filed for unemployment. Today, over 17 million are still out of work, and many who are working are doing so for less pay and fewer hours. A second wave of unemployment is also looming as businesses struggle to attract customers.
It’s a crisis that feels like it may never end, especially considering mortgage defaults are already double the 2019 rate when comparing May 2019 to May 2020.
Mortgage Crisis Appears Imminent
Due to chronically high unemployment rates, reduced federal unemployment benefits, and a lack of agreement by Congress to fund an economic relief package, some economists and the White House are concerned that an increase in mortgage defaults is unavoidable.
According to the Mortgage Bankers Association, 3.7 million homeowners are in a forbearance program. While forbearance helps in the immediate moment, it isn’t a long-term solution as families struggle to manage their money while having to pay everyday living expenses. In 2019, 51% of Americans said they couldn’t afford to miss one paycheck.
Once the forbearance period ends, all payments are due from the date the forbearance was granted. That’s thousands of dollars for the average homeowner.
If that’s not bad enough, the storm clouds have already formed as 7.3% of mortgages nationwide were 30 days or more past due in May. Data analytics company CoreLogic is forecasting that delinquency rates will quadruple by the end of 2021. That would result in 3 million homeowners who are under threat of foreclosure.
Government Relief Is a Temporary Solution
Through government relief legislation, the impact of the blow was softened for millions of homeowners. However, that can’t last forever, even if Congress passes another relief bill soon. Emergency declarations can temporarily halt foreclosures. The effect is millions of delinquent homeowners will lose their protections when the emergency orders are lifted, and possibly their homes.
So, what can you do if you’re faced with foreclosure at no fault of your own? The best thing you can do is be proactive with your mortgage provider. Ducking them when they call or email won’t help your cause. Also, do what you can to find ways to improve your cash flow. Improve your job skills, find a job that will meet your financial needs, take up a side hustle, or possibly start a business. The important thing is not to ignore the situation, take proactive steps to protect yourself and your home.
By Don Purdum, Freelance Contributor
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