Corona Virus on mortgages

The Coronavirus Mortgage Bailout: Is It Going To Be Chaos?

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Recently, mortgage forbearance was issued to many borrowers requesting assistance amid the Coronavirus pandemic. The problem is, long holds and unclear terms seem to be the current normal with this issuance.

The Cares Act mandates that all borrowers with government-baked mortgages be allowed to delay at least 90 days of monthly payments, possibly up to a year’s worth. Servicers are granting the payment deferrals to borrowers with no questions asked, as is required by law, but the servicers still have to pay mortgage bond holders.

In normal times, these servicers would have enough money to pay their bond holders. In fact, at the end of last year the mortgage delinquency rate was a near record low, according to CoreLogic. Unfortunately, the rate is skyrocketing now and there’s not enough money to pay the bond holders.

A coalition of mortgage and finance industry leaders issued this statement on Saturday, “The scale of this forbearance program could not have been foreseen by mortgage servicers, or fully anticipated by regulators… it is therefore incumbent upon the government to provide a liquidity facility for single-family and multifamily servicers…any further delay could lead to greater uncertainty and volatility in the market.”

Some are predicting around 12 to 15 million households will receive some forbearance on their home loans. Unfortunately, even as Americans begin to receive checks from the government, there is no guarantee they will use that money to pay their mortgages. The forbearance program forbids servicers from asking for any proof of hardship.

Along with this forbearance, the market is already causing problems for people who are trying to get new loans or refinance their current mortgages. For example, Wells Fargo and UWM are placing restrictions on jumbo lending to its customers.

If you have any questions about forbearance and if you should move forward with it as a mortgage holder, reach out to us today: kthayer@rfmoc.com.