Impact of CARES Act Expiration and High Interest Rates
Let’s dive into the 2023 market forecast, focusing on the effects of the CARES Act expiration and the current high interest rate environment in the mortgage market.
Interest Rates: In 2022, the Federal Reserve maintained lower interest rates to stimulate economic growth, resulting in increased home prices. However, in 2023, interest rates saw upward pressure in well into Q2, causing a push-pull effect in the housing market. Homebuyers with equity may be less likely to sell in this market, resulting in less inventory. While at the same time, fluctuating home prices may incentivize other homeowners to sell. A dip in the employment rate could also potentially affect homeowners ability to stay current on payments, or even get a loan modification. Those who are seeking loan modification agreements are in some cases, experiencing interest rates as high as 9.99%! This could be an added financial stress for some homeowners, the good news is, as note investors we are able to offer some flexibility here once that loan makes its way to our portfolio. We can help borrowers where the banks are unable to do so.
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CARES Act Expiration: For those who received forbearance on their mortgages through the CARES act, it is now time for them to repay those missed payments. With all state foreclosure and eviction moratoriums expiring, we are witnessing an uptick in foreclosure activity, with a handful of states ( Illinois, Delaware, and New Jersey) being hit exceptionally hard. The pace of this trend now depends on litigation, and borrowers’ ability to resume mortgage payments.
Regulatory Changes: The Consumer Financial Protection Bureau (CFPB) is focusing on fair lending practices, consumer data protection, and foreclosure policies in 2023. Big banks also tightened lending standards, impacting the secondary mortgage market.
Market Forecast for 2023: Looking ahead, several factors will shape the secondary residential mortgage market. Key insights to monitor include the impact of rising interest rates, the push-pull effect in the housing market, uptick in foreclosure activity, and the influence of regulatory changes. Investors should closely monitor these developments and adapt their strategies accordingly.