The Foreclosure Crisis Waiting in January

When Nora Hertel’s husband lost his job working at a small, private school for kids with special needs earlier this year due to the pandemic, their two-income household was instantly scaled down to one. Hertel, a marketing communications specialist at NCALL Research Inc., says she and her husband initially paid their mortgage with money from savings. As months passed, however, the couple started to miss their 15-day grace period and receive penalties.

“It was just getting to the point that by the time I paid the mortgage, the next bill would come in,” Hertel recalls. “And then there were times that I would pay the mortgage and then end up late on my credit card and other things. We just didn’t have enough and I had to choose one or the other.”

For homeowners like the Hertels, the CARES Act provided an option for financial relief by stipulating that single-family homes with a government-backed mortgage are automatically eligible for forbearance if they have been affected, directly or indirectly, by COVID-19. Homeowners who meet this criterion and request assistance are entitled to an initial forbearance period of up to 180 days (6 months) and a one-time extension of an additional 180 days, should they choose to take advantage of it.

Though the CARES Act provision has acted as a safeguard to prevent homeowners from suffering complete devastation at the hands of the pandemic, it has not come without challenges. As with the nationwide eviction moratoriums, housing advocates and counselors say that the conditions of the provision are unclear to the average consumer, particularly relating to their rights and how to manage and exit their forbearance term. As a result, housing advocates and counselors are bracing for a foreclosure crisis in early 2021 once the provision expires on Dec. 31. It’s unclear, however, just how severe next year’s pending crisis might be.

A Skewed Picture

While there is no question that there will be a foreclosure crisis, housing experts say ...