Forbearances: The Next Market Opportunity?



The Forbearance ‘Rescue’

Perhaps William R. Emmons, an economist with the Federal Reserve of St. Louis said it best. “We have no idea what the true state of the housing market is—or would be, hypothetically—because we’ve hit it with such a huge dose of morphine.” The morphine being mortgage forbearances Today over 2.6 million Americans are in a forbearance plan- and most certainly tens of thousands of these homeowners have reached the age to become eligible for a reverse mortgage. The message homeowners may want to ignore is despite repeated extensions allowing homeowners to pause payments or avoid eviction, a day of reckoning is coming.

Forbearance plans allow borrowers to reduce or pause payments while foreclosure moratoriums stop any pending foreclosures and subsequent evictions. To date, there have been five extensions of foreclosure and eviction moratoriums and one extension of the forbearance period for federally guaranteed mortgages. Prior to being sworn into office, President Biden called on Congress to extend moratoriums and forbearances through September of 2021. We could conceivably see foreclosure mitigation measures in place as long as two years after the COVID-19 pandemic hit our shores. So don’t be surprised to see more extensions into next YEAR should the tangled nest of delinquent mortgages become too politically & economically toxic to unwind.

Now on to the business of senior mortgage holders who find themselves in a forbearance plan. In the last year, I’ve called a reverse mortgage the ‘ultimate forbearance plan’. The question for you, our viewers, is

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1 comment

Don Opeka March 17, 2021 at 8:52 am

Forbearance is a big issue, but an even bigger one is the government stopping all foreclosures and evictions. With this, the government has said landlords have no right to collect rent and lenders have no right to collect on loans. Given these rules, why would any rational person be a landlord or a lender? I’m already seeing stories of landlords selling at a huge discount because they can’t keep making mortgage payments while collecting no rent. Same for stopping foreclosures. Why lend if the government says the lender is not allowed to collect? Why work, save, and invest if the government is going to steal the savings and investments with inflation while providing “free stuff” for all? The only problem with “free stuff for all” is who will mine, make, and grow the “free stuff?” Why work a dirty job if the government will provide everything you want without doing the dirty work? How will the politicians and computer geeks eat when there is no one to do the back breaking work of growing and picking vegetables or shoveling cow shit? Politicians love dining in fancy restaurants, but they forget that for them to have a steak, someone has to shovel the shit. They love their electric cars, but someone still has to mine the minerals to make the batteries. They love windmills, but someone still has to make them and maintain the grid. Who will do these jobs when everyone has a guaranteed minimum income? Why would anyone do these jobs if they can have free food, clothing, and shelter without the work?

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