The COVID-19 pandemic has wreaked havoc on many countries across the globe, especially the United States. At this point, it makes sense to worry about an imminent mortgage meltdown.
It was only in 2008 that a nationwide financial crisis caused lots of people to become homeless and penniless. The last thing Americans need is a situation that’s as bad if not worse than what happened only 12 years ago.
Is there a new residential mortgage crisis on the horizon? Keep reading to learn all about what might happen in the coming months.
The Possibility of a Housing Crisis
The reality of the situation is that people across the country are having a hard time keeping up with either their rent or their mortgage payments. When thinking about the possibility of a mortgage crisis, this fact alone is concerning.
Of course, this shouldn’t come as a surprise when we keep in mind that almost 20 million Americans are claiming unemployment.
The pandemic hasn’t even come close to an end in the United States. Things are going to become a lot worse before they become better. Many people will be left with little to no income, if not worse than that.
Considering what has already happened, the upcoming mortgage crisis could be even worse than the 2008 crisis.
Simply put, when people stop paying one bill, such as a mortgage payment, this can create a domino effect. By the end of the pandemic and for a long time after, there could be an economic recession if not an all-out depression.
Preventing a Housing Crisis
The 2008 mortgage crash was caused by a surplus of people defaulting on their mortgages. The big-risk loan products were working against them from day one. Looking at it from that point of view, it was an inevitable collapse.
This is one way in which the potential future crisis differs because homeowners aren’t wrestling with risky loan products.
Some good news is that Congress has set up measures to help homeowners who have government-backed mortgages. Those homeowners who are financially affected by the pandemic have been getting breaks on their mortgage. This comes in the form of up to six months of forbearance.
If you’re still in a bad financial spot after the six-month period, you shouldn’t worry because you can apply to get another six months. The problem with this preventative measure is that it will put a lot of pressure on mortgage servicers, so it’s not fool-proof.
Of course, this also won’t help people with mortgages that aren’t government-backed, so more measures will need to be taken if a new mortgage crisis is going to be avoided. An impact on real estate market, for instance, is almost inevitable.
Is There a New Residential Mortgage Crisis?
Now that you know what could happen in the coming months, you can start considering the possibility of a new residential mortgage crisis. Although the future is uncertain, being prepared for the worst can help you stay calm.
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