Of all the catastrophes that befell 2020, a foreclosure crisis was not among them: In fact, foreclosures over the year were the lowest of any year going back to at least 2005, thanks to government protections that have shielded homeowners during the pandemic, according to a new report.
There were 214,323 properties with default notices, scheduled auctions, or bank repossessions in 2020, representing 0.16% of all US properties and down 57% from 2019, ATTOM Data Solutions said in a report Thursday. Foreclosures peaked in 2010, when 2.9 million properties—about 2.2% of the U.S. total—were in foreclosure.
“The government’s moratoria have effectively stopped foreclosure activity on everything but vacant and abandoned properties,” said Rick Sharga, Executive Vice President of RealtyTrac, an ATTOM company, in the report.
The federal government has extended several protections against foreclosure during the pandemic. Homeowners who have single-family loans backed by Fannie Mae or Freddie Mac benefit from a foreclosure moratorium that lasts at least until Jan. 31. Those with Federal Housing Administration (FHA) loans, VA-guaranteed loans, or U.S. Department of Agriculture (USDA) loans are protected through at least Feb. 28. Furthermore, homeowners with federally backed loans suffering financial hardship because of the pandemic can apply for 180 days of forbearance, with a possible 180-day extension, thanks to a provision of the CARES Act.
The housing market has been an outlier in the dismal pandemic economy, as historic low interest rates have helped propel a buying frenzy for those homebuyers lucky enough to have avoided financial shocks. This has led to another protective factor against foreclosures: high home prices, which have allowed homeowners to build up unprecedented amounts of home equity. Borrowers behind on their payments can always sell their homes instead of losing them to foreclosure, so long as their home values outweigh their mortgage debts.
Still, what happens when foreclosure protections expire is uncharted territory. Sharga said there is a backlog of foreclosures building up, including loans that were in foreclosure before the moratoria, and those that would have defaulted even if the pandemic had not hit.
“While it’s still highly unlikely that we’ll see another wave of foreclosures like the one we had during the Great Recession, we really won’t know how big that backlog is until after the government programs expire.”