Even though data indicates a decrease in inflation, many individuals continue to experience financial strain. The persistently high expenses across various items like fuel and food are contributing to undue worries about potential challenges in meeting mortgage obligations. However, does this situation imply an impending surge in foreclosures?

Here's why the data and experts indicate that it won't occur.

There Aren’t Many Homeowners Who Are Seriously Behind on Their Mortgages

During the last housing crash, a major factor contributing to the high number of foreclosures was the lenient lending standards. This made it effortless for individuals to secure mortgages, even if they couldn't demonstrate their ability to repay them. Lenders at that time were less stringent in evaluating applicants' credit scores, income, employment history, and debt-to-income ratio.

Since then, lending standards have become significantly stricter. Lenders are now more thorough in evaluating applicants for home loans. This has resulted in an increase in qualified buyers who pose a lower risk of loan default.

Based on data from Freddie Mac and Fannie Mae, the graph below illustrates a continuous decrease in the number of homeowners facing significant delays in their mortgage payments, also known as delinquencies.

Borrowers nowadays are not just more qualified but are also figuring out how to deal with their challenges. They are looking into different repayment options or leveraging the high equity in their homes to avoid foreclosure completely.

The Answer Is: There’s No Sign of a Wave Coming

Based on the current situation, a substantial increase in foreclosures would only occur if a large number of individuals were unable to meet their mortgage obligations. However, given that many buyers are currently keeping up with their payments and homeowners have considerable equity, the likelihood of a foreclosure wave is low.

According to Bill McBride from Calculated Risk, a housing market expert who predicted the 2008 foreclosure crisis after studying the market data, he mentioned the following:

““We will NOT see a surge in foreclosures that would significantly impact house prices (as happened following the housing bubble) for two key reasons: 1) mortgage lending has been solid, and 2) most homeowners have substantial equity in their homes.”
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— Bill McBride of Calculated Risk

Bottom Line

There is no data to indicate an impending foreclosure crisis, as buyers today are more financially qualified and are keeping up with their mortgage payments.