A headline about rising foreclosures can sound alarming. But an increase alone does not tell you how many homeowners are in trouble, what alternatives they have or how the housing market might handle additional homes for sale.
The pandemic forbearance program is an important part of that story. It allowed many homeowners to pause mortgage payments during the financial uncertainty created by the health crisis. When the program began, many experts worried that it would eventually produce a wave of foreclosures like the one following the previous housing crash.
The original analysis offered four reasons that comparison did not fit the conditions it described. Those reasons are useful for understanding foreclosure headlines, provided we keep the historical numbers in their proper context.
The figures below describe the reports cited in the original article. They are historical snapshots, not a statement of present market conditions.
1. Leaving Forbearance Did Not Automatically Mean Foreclosure
The first question is not simply how many homeowners paused their payments. It is what happened when they left forbearance.
According to the Mortgage Bankers Association, or MBA, findings cited in the original article, most homeowners exiting their plans were either fully caught up on payments or had an arrangement with their lender that restructured their loan so they could resume making payments.
That distinction matters. A homeowner who leaves forbearance with payments caught up is in a different position from someone who leaves without a repayment plan. Treating both situations as signs of an approaching foreclosure wave misses the point of the data.
What About Homeowners Still in Forbearance?
The same MBA report estimated that approximately 525,000 homeowners remained in forbearance at the time of that report.
Those homeowners still had the opportunity to work out a suitable repayment plan with the servicing company representing their lender. Remaining in forbearance was not, by itself, a declaration that foreclosure would follow.
The useful question is what repayment arrangements are available and how homeowners are moving out of forbearance. The number still enrolled tells only part of the story.
2. Equity Gave Many Homeowners Another Option
Not every homeowner leaving forbearance had a plan in place. Even so, the original analysis noted that many had enough equity to sell their homes instead of facing foreclosure.
Rapid home-price growth over the two-year period discussed in the original article had given the average homeowner record equity gains. That equity was another important difference between the conditions described and the earlier housing crash.
For homeowners unable to work out a way to stay, selling could be an alternative to foreclosure. That does not mean every homeowner had the same options. The original claim was that many had enough equity to consider that path.
Staying and Selling Were Both Part of the Picture
Marina Walsh, CMB, MBA's Vice President of Industry Analysis, pointed to limited national housing inventory and the variety of home-retention and foreclosure alternatives available across different loan types.
Her assessment was that borrowers had more choices to remain in their homes or sell without resorting to foreclosure.
The practical takeaway is straightforward: a discussion of foreclosure risk should not leave out equity or the alternatives available to the homeowner. Counting borrowers with payment difficulties without considering those options produces an incomplete picture.
3. A Rise From a Pause Needs Context
One of the less-discussed benefits identified in the original article was time. The forbearance program gave homeowners facing financial difficulties an extra two years to get their finances in order and work out a plan with their lender.
That helped prevent foreclosures that otherwise would have reached the market without the program.
The original analysis also reported that, as homeowners left forbearance, foreclosure activity remained below its pre-pandemic level. Foreclosures had increased compared with the preceding period when they were paused, but they were still well below the levels seen in more typical pre-pandemic years.
Ask What the Increase Is Being Compared With
Both statements can be true: foreclosures can increase from a paused level and remain below a more typical level.
That is why the comparison period matters so much. A headline emphasizing an increase does not necessarily explain whether the starting point was unusually low.
Before drawing a conclusion, ask:
- Is the comparison against a period when foreclosures were paused?
- How does the number compare with the pre-pandemic baseline used in the report?
- Does the report explain what happened to homeowners leaving forbearance?
These questions keep the focus on what the figures actually show, rather than on the headline alone.
4. Housing Inventory Changed the Backdrop
During the earlier housing crash, foreclosed homes added to an existing oversupply of houses for sale. The original article described the opposite situation: a market with too few available homes.
The National Association of Realtors, or NAR, Existing Home Sales Report cited in that article provided the following historical inventory snapshot:
- Total housing inventory stood at 950,000 homes.
- Inventory was up 11.8% from the preceding month.
- Inventory was down 9.5% from the comparable period a year earlier, when it stood at 1.05 million homes.
- Unsold inventory represented a 2.0-month supply at the report's sales pace.
- That supply was up from 1.7 months in the preceding month and down from 2.1 months a year earlier.
The original article used approximately six months of inventory as the benchmark for a balanced market. Against that benchmark, a 2.0-month supply represented a severely understocked market.
Based on those conditions, its conclusion was that the market could readily absorb additional listings. It went further, stating that even one million additional homes would not have provided enough inventory to meet the demand it described.
That conclusion belongs to that historical supply-and-demand picture. It should not be carried forward as an automatic prediction about another market.
Bottom Line: Read Beyond the Foreclosure Headline
The original article's central point remains useful: context matters. Its reported increase in foreclosures followed a pause, while the overall number remained well below pre-pandemic levels. Repayment arrangements, homeowner equity and limited inventory all helped explain why the situation differed from the previous housing crash.
Your next step is to look at the comparison period, repayment outcomes, equity and available inventory before deciding what a foreclosure headline means for you. If you are concerned about your own payments, start by asking your mortgage servicer about a suitable repayment plan. Reach out to Ed Parcaut to talk through your questions and put housing-market information in the context of your buying, selling or homeownership plans.
