Editor’s note: This piece originally appeared in the February 2021 edition of DS News.
The million-dollar questions that everyone in the industry is asking right now are: “What are foreclosures going to look like once the foreclosure moratoria and forbearance programs come to end? And will we see all those borrowers in forbearance end up in default?”
The short answer is “there probably won’t be a foreclosure tsunami.” But mortgage servicers and other default servicing professionals should prepare themselves nonetheless. Some industry analysts have predicted a huge wave of foreclosures once the forbearance program comes to an end. Popular opinion at the start of the pandemic was if there were 4 million people in forbearance, we’d ultimately have 4 million people in foreclosure. But the way the program has worked so far suggests that’s simply not the case. The Federal Reserve Bank of St. Louis estimated that 500,000 borrowers avoided foreclosure during the fourth quarter of 2020 due to coordinated relief efforts, which makes the CARES Act forbearance program is one of the best examples we’ve ever seen of the government and the industry working hand-in-hand to accomplish such a positive outcome.