Foreclosures around the country jumped during October, with Alabama foreclosures near the top of the nation. 

In the third quarter of 2020 (July through September), The Federal Reserve Bank of New York reported that there were about 16,000 new foreclosures, or about 5,333 per month–the lowest number since the New York Fed started assembling its quarterly Household Debt and Credit report in 1999. But, Attom Data Solutions is reporting a significant turn in the fourth quarter. 

The company reported 11,673 October foreclosure filings around the country. “Foreclosure filings” is a bit broader than the new foreclosure notations reported by the New York Fed, so the increase isn’t quite as dramatic as it appears. Still, there was a significant increase in foreclosure activity in October. While filings remain significantly lower than the total filings in the same month last year, the number reflects a 21% increase over September filings. That’s with some coronavirus-related protections for homeowners still in effect. 

According to the National Housing Law Project, about 70% of single-family residential mortgages are federally-insured and thus protected by federal mandates. But that leaves about 14.5 million homeowners unprotected–even before federal protections expire. And it means tens of millions of others will become vulnerable as the clock runs down on moratoriums and mandatory forbearances.

Mortgage Delinquency Rates are Deceptively Low

Many sources, including the Federal Reserve Bank of New York, report declining mortgage delinquency rates during the pandemic. But that decline is in large part due to forbearances and other changes in status attributable to either government mandates or Covid-19 relief programs created by lenders. Some homeowners who are having trouble making mortgage payments have been removed from delinquent status or have stopped progressing toward more serious delinquency. But many of those homeowners may be unable to get back on track quickly enough when protections abruptly disappear–particularly if unemployment numbers remain high and Covid-19 remains a threat.

180-day forbearances secured under the CARES Act are beginning to expire. And, though those forbearances can be extended, the extension isn’t automatic. A borrower who fails to request an extension before the initial forbearance expires may be locked out. The mandatory forbearance maxes out at 360 days (a 180-day forbearance and a possible 180-day extension), which means even those who qualify for both the initial forbearance and the extension will start losing protection in the spring.

In short, the increase in foreclosure actions in October is likely only the beginning, with additional surges on the horizon as remaining protections expire.

Alabama Among the Hardest-Hit States in October

The increase in foreclosures in October wasn’t evenly distributed around the country. That’s partly, though not entirely, because state-level protections remain in place in some areas. 

Alabama posted the third-highest foreclosure rate in the nation in October, with one foreclosure filing for every 6,660 residential housing units. That’s compared with a national rate of one in 11,683. And, in some areas, the rate is much higher. Birmingham was among the top metro areas in the country, with a foreclosure filing on one in 1,993 homes. 

Statewide, there were 268 lender repossessions: foreclosures in which the property didn’t sell at auction or there was no bid high enough, and so the lender took back possession of the property. 233 of those were in Birmingham. 

Mortgage Past Due? Get Information Now

If you’re behind on your mortgage and currently unprotected or facing expiring protections, the time to educate yourself is now. There is no one right answer for people facing foreclosure. For some, assistance or modifications may be available, even after Covid-related legal protections expire. For others, the threat of foreclosure is a trigger to reassess and determine whether holding on to the property makes sense for your family at this point, or it would be better to explore a short sale or other solution that frees you from your mortgage. And, for some, bankruptcy offers a solution.

Bankruptcy doesn’t magically put an end to a foreclosure action, but it can stop the clock long enough to work out the best solution for you. If you have sufficient income, Chapter 13 bankruptcy may offer a long-term solution. In a Chapter 13 plan, past-due balances are paid in monthly installments across a three to five year period. 

Protecting a home through Chapter 13 requires keeping current payments up to date as they come due while also making a monthly payment to the bankruptcy trustee to be distributed to creditors, including your mortgage lender, to pay past-due balances. So, it’s not workable for everyone. But, for people who have enough regular income to make current payments while catching up over time, Chapter 13 can stop the foreclosure process and provide for a manageable repayment plan. The best way to determine whether bankruptcy might help you avoid foreclosure is to talk with a local bankruptcy lawyer.

Talk to an Experienced Bankruptcy Attorney

The attorneys at Bond & Botes have devoted decades to helping people resolve debt and move forward into more stable financial futures. We offer free consultations to people facing foreclosure, wage garnishment, repossession and other financial challenges. You can schedule your right now by calling 877-581-3396 or filling out the contact form on this page. 

For your safety, we offer remote consultations by phone and video.

Bradford Botes
Written by Bradford Botes

Brad Botes is a principal of each of the Bond & Botes Law Offices throughout Alabama, Mississippi, and Tennessee. He holds a Bachelor of Science from the University of North Alabama, and a Juris Doctorate from Cumberland School of Law at Samford University. He and his team of bankruptcy lawyers have spent over 30 years guiding people through financial challenges. Read his full bio here.

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