Foreclosures Pick Up the Pace After Ban Ends

Some protections for homeowners remain in place, for now

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Foreclosures ramped up in August after a ban that applied to loans backed by the federal government expired at the end of July, according to a new report.  

A total of 15,838 U.S. properties were in some stage of foreclosure in August—27% more than in July—meaning that they were in the process of being  repossessed by banks or scheduled for auction, or that the owners had been served default notices, ATTOM Data, a property data company, reported Thursday. The increase was no surprise, since a ban on foreclosures on homes with federally backed loans expired July 31.

“As expected, foreclosure activity increased as the government’s foreclosure moratorium expired, but this doesn’t mean we should expect to see a flood of distressed properties coming to market,” said Rick Sharga, executive vice president at RealtyTrac, an ATTOM company, in a press release. 

While the foreclosure ban has ended, 1.6 million homeowners were still in forbearance at the end of August, the Mortgage Bankers Association reported Tuesday. Forbearance programs let borrowers affected by the pandemic’s economic downturn skip payments for up to 18 months without penalty, making up for the skipped payments later on.

However, the clock will run out at the end of September on forbearance for the first homeowners to take advantage of it, those who entered at the earliest opportunity, in March 2020. By the end of this year, a total of about 900,000 homeowners will leave forbearance, the Consumer Financial Protection Bureau estimated in June, and those borrowers will be at risk of immediate foreclosure if they don’t make repayment arrangements with their banks.

Despite the expiration of the forbearance plan, a few rules remain in place to give homeowners a softer landing. A CFPB regulation that took effect at the end of August requires lenders to make extra efforts to get homeowners into loan modifications before resorting to foreclosure. And there’s still some protection from eviction, at least through September, when a ban on evictions from single-family homes with federally backed mortgages is scheduled to expire. 

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