Foreclosure and Eviction Moratoriums Remain in Place, But for How Long?
During the COVID pandemic, Congress placed a moratorium on all foreclosures and evictions. The deadline for that reprieve has elapsed four times since it was instituted in April. It is set to expire on the first of September. It is not clear whether Gov. Ron DeSantis will extend the deadline yet again.
That has a number of Americans wondering what will happen once those foreclosure and eviction deadlines have run out.
Millions of People Become Homeless
For reasons that should be obvious, the government wants to prevent this from happening. Not only would it be devastating to the families who are now out on the streets, but the economy would likely not recover from a flood of homeless Americans who are now too poor to afford to live.
Complicating matters is the role of the lenders and banks in pushing foreclosures through. If there are a flood of Americans who are now homeless, it would put the real estate market in a position where there are too many homes in inventory and not enough people able to afford those homes. That would cause the real estate market to plummet in value. Banks would be forced to reduce the price of the houses considerably for them to recover anything from the agreement.
Further, those who defaulted on their mortgages may be saddled with delinquency balances from their lenders. The lender is entitled to sue the mortgage holder for the difference between the expected amount of loan money and the money they received at auction. Of course, the borrower would simply discharge this money in bankruptcy.
Nonetheless, this would cause a situation in which everyone loses.
Banks Offer Ways to Rehab Defaulted Mortgages
Those impacted by the pandemic are prevented from being kicked out into the streets by lenders and landlords, but that’s the only lifeline they’ve been thrown. They are still expected to make payments on their homes and pay rent, but the typical consequences aren’t in place. Those who have no made full payment on their homes could find that the bank forecloses on their mortgage.
But because this is unlikely to work in the bank’s favor, they will be more likely to offer borrowers a chance to rehabilitate or renegotiate the terms of the mortgage. The problem is, that not everyone will qualify.
Congress may need to pass other provisions to protect borrowers from foreclosure, but if they don’t, we could see an avalanche of foreclosures happening at once. Again, this depends on the banks being able to profit more from the foreclosure and resale of the home than they would from allowing borrowers to make payments toward the arrearage.
Nonetheless, the situation is stressful for many Americans.
Can Bankruptcy Help?
In certain situations, bankruptcy can help a borrower keep their home and rehabilitate their loans. If you’re experiencing financial struggles right now, call the West Palm Beach bankruptcy attorneys at Bruce S. Rosenwater & Associates today to learn more about how we can help.