Forbearances creating foreclosures with equity – the untold story of 2022

Stop Foreclosure

The untold story of 2022 is the large number of homeowners in forbearance at risk of foreclosure. It’s an impossible situation. Equity without liquidity.

Confusing forbearance offers and misinformation published in early 2020 created a foreclosure crisis for owners with equity who aren’t being helped.

Many news sources and industry leaders continue to publish “it’s not 2008” as a reason to not be concerned about foreclosures. The ugly truth and untold story of 2022 is that a large number of homeowners in forbearance because of COVID related hardships are at risk of foreclosure. It’s an impossible situation. Equity without liquidity.

Forbearances must be paid in full and the loan reinstated before the home owner can refinance to pay off the default.

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Cutting edge artificial intelligence gives news sources and industry leaders access to information about equity in homes scheduled for foreclosure auction. This is the basis for reports stating there’s not a foreclosure risk in 2022.

The untold story is that homeowners cannot access their equity to pay off the forbearance balance. Add to that, higher interest rates and a strong pull back on alternative lending sources such as hard money loans, remove options for accessing equity.

Many forbearances were converted into a deferment where the missed payments are added to the balance of the loan. However, that new higher loan balance means increased monthly payments. Sometimes that’s the tipping point that pushes the property into default. Higher payments that are unaffordable.

During the mortgage crisis, short sales were negotiated in an environment where foreclosures were a negative asset on the lien holders’ balance sheet that needed to be resolved. In 2022, lien holders are approaching foreclosures as corporate investors leveraging assets for a profit.

The foreclosure pipeline in 2022 has a different cause than 2008, different systems and artificial intelligence at play, and a different sales strategy. Banks are selling REO’s or as they prefer, “corporate owned” homes, at or above market value.

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SUSANNA KUNKEL, REALTOR with EXP REALTY is a Certified Distressed Property Expert. She has helped home owners stop foreclosure, find solutions and save their credit since 2007 when she faced her own impossible situation early in the mortgage crisis. Her new construction townhome with $100K equity couldn’t be refinanced when her ARM adjusted because the developer walked without completing the project. Her passion to help homeowners at risk of foreclosure has continued since then, having literally been in their shoes.

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