Lenders should be better prepared to deal with home owners who are in danger of losing their home, the Consumer Financial Protection Bureau (CFPB) warned on Thursday.
The CFPB says that as a number of pandemic-related assistance programs lapse this summer, more Americans will be in jeopardy of foreclosure. The CFPB says that a possible increase in foreclosures is “avoidable.”
“There is a tidal wave of distressed homeowners who will need help from their mortgage servicers in the coming months. Responsible servicers should be preparing now. There is no time to waste, and no excuse for inaction. No one should be surprised by what is coming,” said CFPB Acting Director Dave Uejio. “Our first priority is ensuring struggling families get the assistance they need. Servicers who put struggling families first have nothing to fear from our oversight, but we will hold accountable those who cause harm to homeowners and families.”
The CFPB says that 2.1 million Americans who are in forbearance and have federally-backed mortgages are more than 90 days delinquent. CARES Act funding helped keep these home owners from losing their homes, but those programs begin phasing out in June.
The CFPB said mortgage servicers will need “ramped-up capacity to reach out and respond to the large number of homeowners likely to need loss mitigation assistance.”
Data from servicer Freddie Mac indicates that fewer Americans are struggling to make mortgage payments than early in the pandemic, suggesting programs have helped keep people in their homes.
Freddie Mac says it has forbearance programs that extend up to 18 months. The organization has suspended foreclosures and evictions through the end of June.
“Freddie Mac is focused on understanding how consumers are thinking about their current and future financial situation amid a pandemic,” said Donna Corley, executive vice president and head of Single-Family Business at Freddie Mac. “While the housing market appears to be healthy and has recovered faster than the rest of the economy, many segments of the population are still struggling. To date, we have helped hundreds of thousands of borrowers get and stay current on their mortgage, and we continue to work with our conservator and industry partners to offer ongoing support.”
In addition to mortgage assistance programs, the US is in the midst of a strong housing market.
According to realtor.com, home prices are up 14.3% from a year ago, and listings are generally selling one week faster. Realtor.com says that fewer homes on the market have driven up demand for housing. There are 50% fewer homes on the market from a year ago.
"The housing market bounced back so much faster than other sectors of the economy that many have forgotten that housing activity slowed to a crawl during the early days of the pandemic," said realtor.com Chief Economist Danielle Hale. "One year later, the demand for housing remains strong, while supply remains limited."