The number of homeowners requesting mortgage forbearance from their loan servicers continue to grow at a massive pace. It is estimated that between three and four million homeowners have been granted a forbearance and are no longer making their mortgage payments. These numbers will undoubtedly continue to rise until unemployment rates drop back to pre-COVID levels. I believe many of these homeowners are still unaware of the dangers of utilizing a mortgage forbearance. (Read COVID-19 Market Update, The Forbearance Dilemma, A MUST READ for Anyone Contemplating Not Making Their Mortgage Payment.)
This ill-conceived mortgage forbearance option raised tremendous concerns as these mortgage lenders and servicers are still responsible for making payments to the investors holding these mortgages, regardless of whether borrowers are making payments. The costs to the industry have been estimated as high as $66 Billion dollars over the next six months. The mortgage industry has been begging regulators and the US Treasury to assist, as this loss of liquidity could drain funds which would otherwise be used to fund new mortgages.
This week, the Federal Housing Finance Agency finally relented and announced that mortgage servicers would only be responsible for the first four months of principal and interest payments on loans in forbearance. The FHFA would pick up the obligation thereafter. Servicers would still be responsible for paying real estate taxes and insurance on these properties. This is good news for the banking industry as well as homeowners and consumers.
Meanwhile, nationwide, underwriting guidelines continue to tighten. Last week I mentioned lenders like Chase, Wells Fargo, Flagstar, and Caliber who are scaling back and discontinuing certain loan products (Mortgage Industry Improves…And Gets A Bit Worse. Allow Faith to Prevail Over Fear). This week I’m beginning to hear that lenders like Chase are planning to discontinue closing on new Home Equity Lines of Credit. It won’t be long before lenders start chopping existing lines like they did in 2009.
There is good news from the battlefront! The volume of COVID hospitalizations and deaths in the New York metro area is now decreasing. It seems we’re on the other side of the curve. However, the battle is not yet won!
Equally important is the survival of the United States economy. For without a healthy economy, there will be just as many deaths from starvation, depression, hopelessness, and suicide. We must all fight for the health of our businesses and those businesses we work for. We must fight to help our local shops, restaurants, and businesses to survive and thrive. This won’t be easy. Nothing worthwhile ever is. However, the alternative would be catastrophically painful. Therefore, Failure Is Not An Option!
Warren Goldberg is President of Mortgage Wealth Advisors, a Certified Mortgage Planning Specialist®, and a published author. His interviews include Blog-Talk Radio, Newsday, The Daily News, Anton Press, and the Long Island Herald. Since 1992, he’s been sharing his financial knowledge and wealth-building strategies, including how to properly use your mortgage as a financial tool. His clients regularly express their trust and appreciation by recommending friends and family call when in need of mortgage, real estate, and financial guidance.