Cities with the biggest number of homeowners facing foreclosure
A group of homeowners are reportedly to be in peril, and are still behind on their mortgage payments. And if this continues, it could threaten the strength of certain ral-estate markets all over the nation. Experts believe that these mortgage borrowers are still at risk and are not out of the woods yet.
In its analysis, the American Enterprises Institute (AEI) stated that, a lot of homeowners that has mortgages backed by the Federal Housing Administration or FHA, are among the many homeowners who have been delinquent with their payments. The AEI is a conservative think-tank which is based in the nation’s capital. About 14.7 percent of the 7.6 million FHA mortgages outstanding across the country were delinquent as of this May 2021. The figure was slightly higher as compared to the previous month.
Included in this reports are mortgage loans that are in forbearance right from the beginning of the global health crisis, the Corona Virus Pandemic. Federal regulators and lawmakers crafted forbearance programs that would give distressed homeowners some breathing space by pausing temporarily mortgage payments.
Those forbearance programs have been extended again, and this allow homeowners to make an appeal for payment relief until the end of September. Homeowners can temporarily stop making payments for anywhere between six to 18 months depending on when they have made their initial request.
The overall number of homeowners that have requested for forbearance has somewhat gone down in the recent weeks, but the percentage remain high for borrowers who are facing financial problems especially those borrowers coming from the FHA backed loans. The FHA program aims at financially troubled homeowners who have lower credit scores and little money except for some for a down payment. The program is quite popular among first-time homebuyers and also among people of color.
The open question however hovers above. What will happen to the FHA borrowers who are currently in a deep financial quagmire when the clock runs out of time on their forbearance? Most Americans who have exited forbearance has resumed making payments successfully and managed to arrange to have the cash that they owe deferred until the end of the loan’s term. For those who were not able to make their normal payments as they previously did can still have their loans changed and modified, however that remains to be seen.
In a report, the American Enterprise Institute Housing Center Director Edward Pinto and research fellow Tobias Peter recently wrote, “If a modification is unable to address the delinquency, the next option is for the borrower to sell the home.”
“Given the rapid level of home price appreciation, this alternative should allow many distressed owners to avoid foreclosure, pay off the mortgage, cover selling expenses and maintain one’s credit record,” they added.
The researchers said that any homeowners who cannot sell their home or modify their loan are most likely are going to face foreclosure or other financially challenging alternative like going on a short sale.
So, whether the distressed homeowner decided to let go of their property by choice or through foreclosure, in the end, it will have an impact and the effect of adding supply to the housing market that they are in.
The researchers quoted that, “As a result, a buyer’s market could develop in ZIP Codes with heavy exposure to such borrowers.”
The two researchers also noted that these would be areas having a huge number of FHA backed loans that are delinquent.
As of May 2021, topping the list of metro is Atlanta with 17.4 percent of the city’s mortgages that are delinquent. Atlanta also has a large share f FHA loan overall. These loans are a fifth of all mortgages found in the city.
Other metro areas that have the same issues are found in the state of Texas, these are, Houston at Number 2, Dallas, number 4, San Antonio number 8 and at number 9 is Ft. Worth.
Please refer below for the listing of metro areas that have mortgages in delinquency.
Metro area | Percentage of loans in delinquency | Percentage of loans in serious delinquency | Percentage of loans backed by FHA |
Atlanta-Sandy Springs-Alpharetta, Georgia | 17.4% | 12.8% | 21% |
Houston-The Woodlands-Sugar Land, Texas | 18.8% | 13.8% | 19.3% |
Chicago-Naperville-Evanston, Illinois | 19.1% | 14.6% | 14.2% |
Dallas-Plano-Irving, Texas | 15.8% | 11.1% | 14.8% |
Washington-Arlington-Alexandria, D.C.-Virginia-Maryland-West Virginia | 18.8% | 14.5% | 13.7% |
Baltimore-Columbia-Towson, Maryland | 17.3% | 12.8% | 19.4% |
Riverside-San Bernardino-Ontario, California | 14.3% | 10.5% | 20.6% |
San Antonio-New Braunfels, Texas | 16% | 11.1% | 19.3% |
Fort Worth-Arlington-Grapevine, Texas | 15.7% | 11% | 18.3% |
Within these concerned metro areas, the neighborhood that are at high risk are most likely those belonging to homeowners having low-income or those with higher percentage of households/people of color.
However given that many of these families were able to make their initial investment grow because of rising levels of home price appreciation, and the lack of housing supply all over the US – these markets can still avoid potential problems if enough families can only afford to sell their homes before they go into foreclosure.