As many have been fearing, eviction bans and foreclosure moratoriums could become the new normal. What does that mean for real estate investors?

Despite the real data suggesting that mortgage loan borrowers and renters are performing great, with few defaults, bans and moratoriums have continually been extended. Even despite being ruled unconstitutional.

Current layers of rulings seem to effectively make these bans run into at least 2022.

The Federal Disaster Housing Stability Act of 2021

This one new bill that is being pushed toward becoming legislation could drag out eviction bans and foreclosure moratoriums, and make them much more commonplace.

The bill aims to automatically trigger these bans any time there is a federal disaster declared. FEMA says a disaster can be declared for almost any reason, including storms, floods, fire, high water, etc.

Other talk around this topic raises concerns over what could be called a disaster in this context in the future. Could it be poor tenants getting a flat tire and having to pay for a car repair? What about high rents, the eviction itself, homelessness, or climate change?

How long would those bans run for after an event? It is easy to see how they could run consecutively forever.

Ironically, around 90% of the taxes collected to finance relief funds for renters and landlords have not been paid out. They seem likely to continue to be diverted into other political pet projects instead.

What Permanent Eviction & Foreclosure Bans Mean For Investors

While on one hand it seems unfathomable that this has happened to this extent already, investors need to embrace this possibility. At least that it will frequently be the new status quo. You simply won’t be able to count on evicting or foreclosing.

The first and most obvious step for most investors and real estate businesses is to switch to the wholesaling model. Be in and out and paid. No problem.

Find end investor customers who will be high volume buyers. Flippers continue to do well in this hyper inflation environment. Though there are landlords with a track record through covid lockdowns and recent bans. Keep an eye out for those switching to short term rentals, and other creative options to stay ahead of this, and to keep up their volume long term.

 

With new foreclosure and eviction bans being put in place, how can you continue to win as a real estate investor?

For a moment it looked like these moratoriums were over, and lenders and landlords could rush back into the market to load up on inventory. Now these bans are being extended into next year.

While some may be fearful or uncertain about the future, others continue to enjoy their best years in real estate ever, and keep on growing. How can you best navigate these times?

New Foreclosure Moratoriums

Together the FHFA and CFPB have issued new rules for mortgage servicers. They effectively prevent many foreclosures being filed until at least 2022.

They also put new pressure on servicers to grant certain terms in loan modifications.

However, note that there are exceptions. Private mortgage loans are not subject to these rules and bans. Nor are vacant properties, or those on which borrowers have defaulted during trial loan modifications.

Overall CoreLogic has been reporting that mortgage defaults have been declining since April anyway. With default rates less than a quarter of than in 2005-2008. Suggesting these moratoriums may not be necessary at all anyway.

New Eviction Bans

At the beginning of August 2021, and despite previous bans being ruled unconstitutional, the Biden administration worked with the CDC to create a new eviction ban.

This new ban is said to last until November 2021. Effectively, ensuring no tenants will be evicted until sometime in 2022 at best.

This ban is said to be selective and not apply to every county in the US. The Realtors association has already reportedly filed a lawsuit against it. Many more lawsuits are likely to follow. Though, with the government already ignoring judge’s rulings which have deemed them illegal and unconstitutional, it’s unclear how much good they will do, even if they win again.

For Landlords

Some landlords are certainly speaking out against these bans. Especially, when tenants are choosing not to pay the rent, and are spending the money on boats, new trucks and even bigger TVs instead.

However, most landlords, especially those with bigger portfolios appear to be reporting strong performance levels, with few defaults.

Of course, those that are getting the rent paid by the government in one way or another are doing just fine, even if tenants are not paying themselves.

Though perhaps one of the biggest concerns may be how to manage out of state income properties if new travel bans are reinstated as well.

Real Estate Wholesaling

Real estate wholesaling certainly seems to still be the lowest risk, and most profitable strategy among all of this.

Using transactional funding wholesalers have almost no risk in making offers and flipping properties. So, line up your funding, and find sources of properties which you can flip. Including vacant property.

As for who to wholesale deals to, you may focus on rehabbers, retail, and landlords experiencing good performance, and may be using Section 8 or short term rentals instead of old annual leases.