Moratorium on most foreclosures extended to end of 2020

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A halt to foreclosures on federally-backed mortgages would have expired today

Recent strength in the housing market may be due, in part, to steps Congress has taken to mitigate the economic impact of the coronavirus (COVID-19) pandemic. A key protection -- a moratorium on foreclosures of homes with government-backed mortgages -- has been extended to the end of the year. 

It’s estimated that about 70 percent of mortgages are backed by the government and are shielded from foreclosure. The moratorium had been scheduled to expire today.

Since March, homeowners with a Fannie Mae or Freddie Mac mortgage have been able to enter forbearance programs if they’ve lost income, allowing them to put off mortgage payments. While there are no firm figures, it’s likely that has kept many homes from entering foreclosure.

When Congress left Washington for a month-long recess without renewing a coronavirus aid package, the Federal Housing Finance Agency (FHFA) stepped in.

Extended to December 31

The agency said it will extend the moratoriums on single-family foreclosures and real estate owned (REO) evictions until at least December 31, 2020. The foreclosure moratorium applies to enterprise-backed, single-family mortgages only. 

“To help keep borrowers in their homes during the pandemic, FHFA is extending the enterprises' foreclosure and eviction moratoriums through the end of 2020," said Mark Calabria, FHFA’s director. “This protects more than 28 million homeowners with an enterprise-backed mortgage."

The moratorium appears to have helped. Real estate data service ATTOM Data Solutions has issued its third-quarter report on foreclosures in the U.S., showing a decline in the number of homes at some point in the foreclosure process.

Potential red flag

But ATTOM Data Solutions has also noted a potential trouble spot for the future. It reports an increase in what it calls “zombie foreclosures,” homes that are sitting vacant during the foreclosure process.

"Abandoned homes in foreclosure remain little more than a spot on the radar screen in most parts of the United States, posing few if any, problems from neighborhood to neighborhood,”  said Todd Teta, the company’s chief product officer. “But the latest numbers do throw a small potential red flag into the air, given the increase in the percentage of zombie foreclosures."

Zombie foreclosures were quite common during the 2009 financial crisis, devastating home values in many neighborhoods. Fortunately, the number of vacant homes in some stage of foreclosure is a fraction of what it was at the height of the housing crisis.

ATTOM Data Solutions’ third-quarter analysis shows that about 216,000 homes are in the process of foreclosure, a relatively small number compared to a decade ago. Of those, only 7,960, or 3.7 percent, are sitting empty.

The number of homes in some form of foreclosure is down 16 percent from the second quarter of the year, but the percentage of zombie foreclosures is rising.

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