In 2008 the housing crash took several years. Banks were slow to foreclose because they didn’t want to take the loss on their balance sheet. Banks let people live for three and four years in homes with unpaid mortgages because the housing prices were so underwater, if the bank repossessed the house, they’d be be required to write the loss off their balance sheet.
Example. Suppose the bank lent $1M to someone for a mortgage that went unpaid. The house is now worth $500k. Right now, the bank has a $1M asset on their balance sheet. Because the mortgage is worth $1M on paper. It’s worth that up until the point the bank forecloses. Then the mortgage ceases to exist, and the house itself is moved to the balance sheet of the bank. Doing this results in a $500k loss to the balance sheet of the bank.
The banks balance sheet is what they use as collateral for them to borrow money. If their balance sheet drops, they are no longer compliant with their debt servicers and are defaulting on their debt and thus collapse.
This time actually is different. The bank lent $500k in 2020 at 3% interest. The house is “worth” $1M on paper at least. The bank is losing money because interest rates are 5% but they’re only getting 3% on these loans.
The bank got the $500k to lend to the home buyer in 2020 by taking customer deposits. At 0%. People lent at 0% because it’s better than keeping cash under the mattress and anti-money laundering laws make it so having large sums of cash can cause legal issues. The bank took the money from customers at 0% and lent it to home buyer at 3% and pocketed a 3% spread to pay employees and keep the lights on.
The mortgage debt is fixed rate at 3% but the customer deposit rate floats and is now 5%. The bank is losing money on each of these mortgages. They want to foreclose.
Further, if the bank forecloses, not only does it get rid of negative cash flowing mortgages they issued but the balance sheet goes up because the house is worth more now than it was at the time of the mortgage, That $500k mortgage from 2020, if foreclosed upon, will put a $1M house asset on their balance sheet.
They WANT to foreclose now. This time is different.
TL;DR: This time is different. If you are in a house with a mortgage and don’t pay, the bank will foreclose now. They are losing money on every mortgage issued in 2020 and want to get rid of them by foreclosing.