I wrote a blog the end of May regarding the Mortgage relief available during the COVID-19 pandemic. Here is a little more on that subject along with some figures and realities behind all the headlines.
First the numbers from the Mortgage Bankers Association (MBA):
- From the beginning of March to Mid March Forbearance requests increased 1,270%
- Mid March to the end of March requests jumped an additional 1,896%
- Caller requests from 3/23-3/29/2020 were over 218,000, the following week jumped over 718,000 (before April payments were even due.)
While lenders are required to to grant mortgagors at least 90 days without any proof of hardship during this time it is important to remember that you will still owe these payments back. There is no set method for this and it will vary from lender to lender and may come in the form of a lump sum payment at the end of the agreed upon term, a structured repayment plan or possibly at the end of your loan term. This has the possibility of raising your payment once you are back to work, eating into your equity with a larger than expected payoff or worse- a lump sum you will probably not be able to afford at the end of the period.
Bad things do happen to good people- If you truly cannot afford your payment due to income loss, CALL your lender, Visit their website and make an informed choice. Do not just stop making payments without calling your current lender first.
If you have the funds, are working from home or have your income replaced by Unemployment checks- it is best to continue making your payments.
The flip side of this - and one that is not often discussed outside of the industry- Responsibility of the mortgage servicer. The Mortgage Backed Securities market (FannieMae, FreddieMac and GinnieMae) was created to provided liquidity for residential loans and help provide the American Dream of Home-ownership. Mortgage backed securities are traded just like stocks and bonds and ultimately the owner of that security is not the lender you make your payment to. You make your payment to a servicer. Even if you pay your mortgage to a bank your loan is probably tied up in a MBS. That servicer is paid to collect your payment, pay your taxes, pay your insurance etc. If you do not pay- the servicer still must pay your taxes, Insurance and even pass along the payment to the security holder. This forgiveness period is estimated it will cost servicers over $100 BILLION if it only lasts 90 days. The unintended consequences of this is the effect on mortgage guidelines, interest rates and servicing values. Effectively a GNMA security now has $0 servicing value. You will see guidelines tightening on FHA loans and VA loans. Rates on these will also be higher especially for lower credit scores while it is anticipated some lenders will pull out of that market entirely. You can see the drastic swings in rates in March from all time lows to multi-year highs in just a few days settling back down to where we are today. It has been a wild ride as investors try to determine if it is even worth the investment to buy mortgages which becomes one big vicious circle.
Stay safe and healthy everyone
Call me for all your residential lending needs!
Robert Rauf
Mortgage Loan Originator NMLS# 248937
http://www.homebridge.com/RobertRauf
or my blog: http://activerain.com/blogs/rrauf
Office: (732)908-4868 Cell (732)740-0175
RRauf@HomeBridge.com
www.RobertRauf.com
Since 1987 I have been helping my clients fulfill their dream of home ownership! HomeBridge Financial Services, Formerly REMN, HomeBridge Financial Services is located at 9 Grand Ave, Building 2 Suite A Toms River, NJ 08753. NMLS #6521. New Jersey Licensed Lender and Mortgage Banker #L041053. Visit www.Homebridge.com for more information. NJ Mortgages, New Jersey Mortgages, Mortgages in NJ, mortgage in New Jersey, Mortgages in New Jersey, Toms River NJ 08753, Toms River NJ 08755, Brick NJ 08723, Brick NJ 08724 Mortgage in Ocean County NJ, Mortgage in Monmouth County NJ, Jackson NJ 08527, Howell NJ 07731, Lacey 08731 08734, Beachwood 08722 Bayville 08721,
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