Advice on Forbearance
David Stevens used to be the FHA commissioner and Mortgage Bankers Association president. He is one of the MOST connected people in the mortgage marketplace in D.C. Here is what I learned from David–
- No hardship letter or proof is required to receive forbearance; you just have to “attest” to your hardship. In other words, check a box.
- Forbearance can be for up to 6 months beginning April 1st IF your loan is owned by Fannie, Freddie, or Ginnie. (Ginnie securitizes FHA and VA loans)
- The borrower will have to make up these payments later either when they refinance (if they can) or sell their home as this principal balance and unpaid interest WILL BE ADDED TO THEIR TOTAL LOAN AMOUNT.
- Forbearance does NOT mean no payment or free payment! There is NO free lunch.
- No late payments will be posted to your credit report if you were current with your mortgage as of March. However, your mortgage will reflect that you are currently in forbearance in the comments section. This is critical to know!
- David said he was told by one very large lender on Wednesday that they will NOT close a loan for someone who has been in forbearance. This means that you can NOT refinance or buy another home right away. I expect other lenders will follow suit soon as well. They might be able to get a new mortgage after forbearance; but it depends on what the servicer says in the comments section of the account. If the servicer says the loan was in forbearance or “borrower completed forbearance” I expect some lenders will treat this like a foreclosure. Then, buyers would have to wait 7 years to get a new conventional loan.
- David asks that anyone who just closed on a new loan to NOT declare forbearance until after they have made at least 1 regularly scheduled mortgage payment. Why? As of right now if a borrower declares forbearance before they make their first payment then the loan will be considered in default by Fannie and Freddie.
Thus, forbearance may be a good option for homeowners who have NO other options, if they have lost their job and, have no money in savings. Remember, forbearance could keep you from refinancing into a better loan in the future or keep you from buying another home.
How will Covid-19 Effect the Market?
Some take aways from Ivy Zelman, one of the top real estate analysts in the country:
- Builders and top RE brokerage websites are still seeing incredibly strong demand from buyers.
- Real estate is still considered an essential business and consumers still want to buy homes to live in. I do not take this lightly and I am making sure that all my clients are doing everything as remotely possible.
- Ivy’s biggest concern for housing is lending – she wonders if underwriters will slow down the process.
- Ivy and her firm are still forecasting that home prices nationally will rise 3% this year, down from 5% before the virus. Why? Inventory levels have been so tight and may tighten even further now.
Housing Market Minute
The average sales price for March for both single-family and detached homes came in just over $490K. We still only have only one month of inventory and I don’t see this changing in the next few months. We have seen the number of listed homes withdrawn from the market increase, but at a slower rate than the previous two weeks.
(Data provided by REColorado for Aurora, Northglenn, Westminster, Lakewood, Thornton, Arvada, Englewood, Edgewater, Centennial, Littleton, Bloomfield, Denver, Golden, Lone Tree)
Much thanks to Lonnie Glessner much of the content was used from his newsletter!
