Apr 5, 2020
It's been another existing week in the mortgage industry. Let's review:
Mortgage Payment Forbearance
There is no shortage of media reports about mortgage payment forbearance during this public health crisis. If you're experiencing financial hardship due to the Coronavirus and you can't make your mortgage payments, please contact your servicer. But keep in mind, this isn't the free ride the media makes it out to be.
Let's be clear. A forbearance is not forgiveness. You still owe that money. If your mortgage payments are waived for three months or six months, your servicer may give you six months to a year to repay that money at the end of the forbearance period. That means your mortgage payments may be 1.5 times the normal amount until you've repaid the balance due. If you're not able to make up those payments, you could risk losing your home.
A forbearance request should be a last resort for those who truly need it.
- Are you retired and still collecting the same pension and social security income that you did before COVID-19? Make your mortgage payment.
- Are your unemployment benefits roughly equivalent to your previous income? Make your mortgage payment.
- Are you trying to decide between paying your credit card balance in full or making the minimum payment so you still have enough cash left over to pay your mortgage? Pay the minimum due on your credit card and make your mortgage payment.
- Do you have a pile of cash in your savings account? You guessed it! Make your mortgage payment.
- Are you working "under the table" and collecting unemployment at the same time? For heaven's sake, make your mortgage payment.
The coronavirus sucks. Lock down sucks. Losing your home a year after this all ends would suck even more. If you're able, make your mortgage payments.
This is your time to shine!
Every loan officer I know has a list of 50+ potential buyers who want to own homes. Some of these folks have been looking for six months to a year. They've made offer after offer and they're always beat out by people with more money, often by buyers with cash. Well guess what potential buyer? This is your time to shine!
Interest rates are lower than they've ever been in the history of the mortgage industry. There are fewer cash buyers, less competition, and new listings coming on the market almost daily. REALTORS® are following strict guidelines to keep you safe. So take advantage of this opportunity. Call your REALTOR® and find your home!
The sky is not falling on the mortgage industry.
At least not yet.
I've read the articles that non-bank mortgage lenders are teetering on the brink of extinction and the forthcoming mortgage meltdown will make 2008 look like a walk in the park. And I think the media is spreading unnecessary fear. Yes, the mortgage industry is facing challenges due to government mandated forbearance, servicing runoff, and a host of other issues. I've written about some of those challenges HERE and HERE and HERE.
But this is not 2008. This is completely different. And it's far too early to worry about things that might never happen. I haven't heard of even one mortgage company that has gone out of business due to the Coronavirus. And I'm pretty dialed into the industry.
Yes, non-bank lenders face unique challenges. But something like 2/3 of all mortgage loans are originated by non-bank lenders. The government isn't going to let all those lenders fail. The Mortgage Bankers Association is already in talks with the Feds about slowing their role on quantitative easing and establishing a liquidity reserve for lenders who are providing forbearance.
And yes, if we end up with 20% unemployment, some mortgage companies will fold (along with a lot of other businesses). But for all we know, most people will be back at work in May or June. Let's not get ahead of ourselves with doom-and-gloom scenarios. It's a little early for that.
What's going on with mortgage interest rates?
They're amazing. They've settled down and we're not seeing the 2% variances per day that we saw a few weeks ago. Mortgage backed securities are literally in uncharted territory. Lenders are working through their capacity issues. Homeowners are taking advantage of opportunities to refinance. And home buyers find that their home-buying budgets are larger than they were three to six months ago.
It's definitely not a boring time to work in the mortgage industry!
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