Mortgage Forbearance

S

sleepy5136

Well-known member
Wanted to get your guys thoughts on mortgage forbearance. I personally felt like this was a policy that saved the housing market from falling once covid started. It really sucked for FTHB like me because that could have been the best time to possibly buy but due to government intervention, I'm instead buying at sky high prices. I get the argument of how it may be a good thing to save homeowners from being foreclosed due to a pandemic, but it really goes against the idea of being a free market. I always wonder how the housing market would be today if there were no mortgage forbearances in place.
 
There is no free market anymore with government/fed. As soon as things head south they come to the rescue.
 
sleepy5136 said:
Wanted to get your guys thoughts on mortgage forbearance. I personally felt like this was a policy that saved the housing market from falling once covid started. It really sucked for FTHB like me because that could have been the best time to possibly buy but due to government intervention, I'm instead buying at sky high prices. I get the argument of how it may be a good thing to save homeowners from being foreclosed due to a pandemic, but it really goes against the idea of being a free market. I always wonder how the housing market would be today if there were no mortgage forbearances in place.
Click to expand...

I heard the same argument. That they saved the housing market by not letting foreclosures or evictions happen. But eventually it will happen. Do you think a person will be able to pay back the money? Probably not. (I talked to many RE investors and they agree with my theory.)

 
I doubt there are a lot of troubled homeowners in Irvine that would have significantly put downward pressure on the Irvine housing market. 

I feel that there are a disproportionate share of WFH and tech employees that didn't get impacted by the job losses of 2020...and probably actually benefited from the stock market gains and increased equity in their homes.
 
eyephone said:
sleepy5136 said:
Wanted to get your guys thoughts on mortgage forbearance. I personally felt like this was a policy that saved the housing market from falling once covid started. It really sucked for FTHB like me because that could have been the best time to possibly buy but due to government intervention, I'm instead buying at sky high prices. I get the argument of how it may be a good thing to save homeowners from being foreclosed due to a pandemic, but it really goes against the idea of being a free market. I always wonder how the housing market would be today if there were no mortgage forbearances in place.
Click to expand...

I heard the same argument. That they saved the housing market by not letting foreclosures or evictions happen. But eventually it will happen. Do you think a person will be able to pay back the money? Probably not. (I talked to many RE investors and they agree with my theory.)
Click to expand...

Irvine was suppose to drop 50% in 2008.  It was predicted by IHB and then Talkirvine.  We saw the government save the economy with QE1 QE2 QE3.  Now that we know this...why do you think the government would let housing prices drop in 2020?


Know your history.
 
eyephone said:
sleepy5136 said:
Wanted to get your guys thoughts on mortgage forbearance. I personally felt like this was a policy that saved the housing market from falling once covid started. It really sucked for FTHB like me because that could have been the best time to possibly buy but due to government intervention, I'm instead buying at sky high prices. I get the argument of how it may be a good thing to save homeowners from being foreclosed due to a pandemic, but it really goes against the idea of being a free market. I always wonder how the housing market would be today if there were no mortgage forbearances in place.
Click to expand...

I heard the same argument. That they saved the housing market by not letting foreclosures or evictions happen. But eventually it will happen. Do you think a person will be able to pay back the money? Probably not. (I talked to many RE investors and they agree with my theory.)
Click to expand...

Problem is that those distressed sellers can take their time and sell into a higher market today so it puts less selling pressure on them. 
 
paydawg said:
I doubt there are a lot of troubled homeowners in Irvine that would have significantly put downward pressure on the Irvine housing market. 

I feel that there are a disproportionate share of WFH and tech employees that didn't get impacted by the job losses of 2020...and probably actually benefited from the stock market gains and increased equity in their homes.
Click to expand...

+1  The issue is NOT a lack of supply, it's the huge demand (mainly driven from low interest rate FOMO on the lower end and higher stock market gains on the higher end).  The lack of supply is the byproduct of very strong buyer demand.  There were more homes listed in Irvine in Q3 & Q4 2020 and there were in Q3 & Q4 2019 which was why we had record sales in the past 3-4 months of the year.
 
zubs said:
eyephone said:
sleepy5136 said:
Wanted to get your guys thoughts on mortgage forbearance. I personally felt like this was a policy that saved the housing market from falling once covid started. It really sucked for FTHB like me because that could have been the best time to possibly buy but due to government intervention, I'm instead buying at sky high prices. I get the argument of how it may be a good thing to save homeowners from being foreclosed due to a pandemic, but it really goes against the idea of being a free market. I always wonder how the housing market would be today if there were no mortgage forbearances in place.
Click to expand...

I heard the same argument. That they saved the housing market by not letting foreclosures or evictions happen. But eventually it will happen. Do you think a person will be able to pay back the money? Probably not. (I talked to many RE investors and they agree with my theory.)
Click to expand...

Irvine was suppose to drop 50% in 2008.  It was predicted by IHB and then Talkirvine.  We saw the government save the economy with QE1 QE2 QE3.  Now that we know this...why do you think the government would let housing prices drop in 2020?


Know your history.
Click to expand...

Bingo, Don't Fight The Fed!  The Fed and the gov't can keep kicking the can longer than any of us will be alive.
 
paydawg said:
I doubt there are a lot of troubled homeowners in Irvine that would have significantly put downward pressure on the Irvine housing market. 

I feel that there are a disproportionate share of WFH and tech employees that didn't get impacted by the job losses of 2020...and probably actually benefited from the stock market gains and increased equity in their homes.
Click to expand...

Forget Irvine. But the housing market in general. They propt up the market.
It is inevitable that there will be a dip once the forbearance is lifted and even after. Another musical chairs or we will deal with it later.

Do you think a person can repay a year of back rent or mortgage. Shoot people struggle to pay back credit cards with a low balance. 
 
eyephone said:
paydawg said:
I doubt there are a lot of troubled homeowners in Irvine that would have significantly put downward pressure on the Irvine housing market. 

I feel that there are a disproportionate share of WFH and tech employees that didn't get impacted by the job losses of 2020...and probably actually benefited from the stock market gains and increased equity in their homes.
Click to expand...

Forget Irvine. But the housing market in general. They propt up the market.
It is inevitable that there will be a dip once the forbearance is lifted and after.

Do you think a person can repay a year of back rent or mortgage. Shoot people struggle to pay back credit cards with a low balance. 
Click to expand...

Those most people that are struggling now have a great opportunity to list their home and get a higher price than what their home was worth pre-covid.  So unless there is a huge flood of homes hitting the market around the same time, I don't expect any kind of material dip in home prices. There will be 3 things that'll cause prices to decline.... a material increase in supply, significantly higher interest rates (above 3.5% to 4%), and/or a significant drop in demand (caused from higher paying job losses).  I don't see any of those 3 things happening this year so that's why I believe my base case are for home prices to continue to increase modestly and my downside case would be prices to remain flattish.
 
So the mortgage forbearance program started since May 2020. So that?s approximately 9 months. Let?s say their mortgage is $2k or $3k a month. So they would owe $18k or $27k to the bank.

Use the same monthly numbers for renters. Do you think they will pay back the landlord that are Individual RE owners or apartment complex owners? 

The kicker if they keep on extend the forbearance another 6.  Then the numbers that is owed to the bank is $30k and $45k respectively. (Using the $2k and $3k payment a month scenario)

So if they don?t pay it back the individual RE investor or Apartment can take them to court. What is the likely hood for them to collect.
 
Postponing a purchase for a "lower price deal" costs more money than one might gain if one ever did find a mispriced home. That said, trees (and Gamestop shares) do not grow to the sky. There will be a leveling of prices at some point.

One of the drags on price appreciation that may occur? 2020 income for the Self-Employed, for the Bonus driven earners, and those with fluctuating hours is (for now...) going to suppress qualifying income. Example:

Universal Underwriting Guidelines ask for SE, Bonus, and Hourly/Variable income to be averaged over the past 2 years. I have a customer who in 2018 and 2019 earned $100kpy but as variable income (Nurse). She has a new job in 2021 that will pay $100kpy - also variable income. In 2020, her income was $50k, plus Unemployment due to the shutdowns. An Underwriter today cannot consider a 3 year average of income for qualifying income ($100k - 2018, $100k - 2019,  $50k 2020 = $6,900 income) , The Underwriting standards today cannot "forget 2020 existed" or use temporary unemployment as income. They cannot use 2018-2019 and the "promise" of 2021 future income ($8,333 per month average). They must use 2019 and 2020 income, averaged over 24 months - about $6,250 per month.

Same for base/bonus income. A person's base might be $100kpy, but bonus income may be $36k year in, year out. If there was a $36k 2019 bonus paid in 2020, but the 2020 bonus payable in 2021 is nothing, Underwriters today must use the lower of two bonus payments as the expected bonus income - which is zero. A $3,000 income reduction will prevent some buyers from moving ahead with a purchase at present prices.

This is easily solved with income qualifying rule changes by the Government backed Agencies, FHA/VA and the Fed for bank lending. "Government change" and "easily solved" are two phrases that rarely coexist. Because of the current underwriting standards a large pool of first and move up buyers will be prevented from taking on new housing in 2021 and perhaps beyond. Fewer buyers can mean less competition for homes. Less competition can lead to flat prices.

 
eyephone said:
So the mortgage forbearance program started since May 2020. So that?s approximately 9 months. Let?s say their mortgage is $2k or $3k a month. So they would owe $18k or $27k to the bank.

Use the same monthly numbers for renters. Do you think they will pay back the landlord that are Individual RE owners or apartment complex owners? 

The kicker if they keep on extend the forbearance another 6.  Then the numbers that is owed to the bank is $30k and $45k respectively. (Using the $2k and $3k payment a month scenario)

So if they don?t pay it back the individual RE investor or Apartment can take them to court. What is the likely hood for them to collect.
Click to expand...

Oh I forgot to add let?s say the apartment complex has multiple tenants that does not pay rent. Your looking at a big loss.
 
Soylent Green Is People said:
Postponing a purchase for a "lower price deal" costs more money than one might gain if one ever did find a mispriced home. That said, trees (and Gamestop shares) do not grow to the sky. There will be a leveling of prices at some point.

One of the drags on price appreciation that may occur? 2020 income for the Self-Employed, for the Bonus driven earners, and those with fluctuating hours is (for now...) going to suppress qualifying income. Example:

Universal Underwriting Guidelines ask for SE, Bonus, and Hourly/Variable income to be averaged over the past 2 years. I have a customer who in 2018 and 2019 earned $100kpy but as variable income (Nurse). She has a new job in 2021 that will pay $100kpy - also variable income. In 2020, her income was $50k, plus Unemployment due to the shutdowns. An Underwriter today cannot consider a 3 year average of income for qualifying income ($100k - 2018, $100k - 2019,  $50k 2020 = $6,900 income) , The Underwriting standards today cannot "forget 2020 existed" or use temporary unemployment as income. They cannot use 2018-2019 and the "promise" of 2021 future income ($8,333 per month average). They must use 2019 and 2020 income, averaged over 24 months - about $6,250 per month.

Same for base/bonus income. A person's base might be $100kpy, but bonus income may be $36k year in, year out. If there was a $36k 2019 bonus paid in 2020, but the 2020 bonus payable in 2021 is nothing, Underwriters today must use the lower of two bonus payments as the expected bonus income - which is zero. A $3,000 income reduction will prevent some buyers from moving ahead with a purchase at present prices.

This is easily solved with income qualifying rule changes by the Government backed Agencies, FHA/VA and the Fed for bank lending. "Government change" and "easily solved" are two phrases that rarely coexist. Because of the current underwriting standards a large pool of first and move up buyers will be prevented from taking on new housing in 2021 and perhaps beyond. Fewer buyers can mean less competition for homes. Less competition can lead to flat prices.
Click to expand...

That is definitely something to consider.  I guess we'll see how that plays out after people have to file their 2020 tax returns. 
 
eyephone said:
eyephone said:
So the mortgage forbearance program started since May 2020. So that?s approximately 9 months. Let?s say their mortgage is $2k or $3k a month. So they would owe $18k or $27k to the bank.

Use the same monthly numbers for renters. Do you think they will pay back the landlord that are Individual RE owners or apartment complex owners? 

The kicker if they keep on extend the forbearance another 6.  Then the numbers that is owed to the bank is $30k and $45k respectively. (Using the $2k and $3k payment a month scenario)

So if they don?t pay it back the individual RE investor or Apartment can take them to court. What is the likely hood for them to collect.
Click to expand...

Oh I forgot to add let?s say the apartment complex has multiple tenants that does not pay rent. Your looking at a big loss.
Click to expand...

I don't follow the multiple family/commercial real estate sector so I can't speak to what is going on or what will happen.  I do know that I have clients who are looking for investment properties, including myself, that are 3+ bedroom condos as those are great move-up renter and move-up buyer properties. 
 
eyephone said:
So the mortgage forbearance program started since May 2020. So that?s approximately 9 months. Let?s say their mortgage is $2k or $3k a month. So they would owe $18k or $27k to the bank.

Use the same monthly numbers for renters. Do you think they will pay back the landlord that are Individual RE owners or apartment complex owners? 

The kicker if they keep on extend the forbearance another 6.  Then the numbers that is owed to the bank is $30k and $45k respectively. (Using the $2k and $3k payment a month scenario)

So if they don?t pay it back the individual RE investor or Apartment can take them to court. What is the likely hood for them to collect.
Click to expand...


So the mortgage forbearance program started since May 2020. So that?s approximately 9 months. Let?s say their mortgage is $2k or $3k a month. So they would owe $18k or $27k to the bank.


As a part of Forbearance program, are they not simply going to extend the life of a loan? There is no way someone who cant pay mortgage of 2K a month can all of sudden start paying 3000 a month once this forbearance is over. 

Maybe SGIP can enlighten us on this subject that how it is going to work.


 
the.irvine said:
eyephone said:
So the mortgage forbearance program started since May 2020. So that?s approximately 9 months. Let?s say their mortgage is $2k or $3k a month. So they would owe $18k or $27k to the bank.

Use the same monthly numbers for renters. Do you think they will pay back the landlord that are Individual RE owners or apartment complex owners? 

The kicker if they keep on extend the forbearance another 6.  Then the numbers that is owed to the bank is $30k and $45k respectively. (Using the $2k and $3k payment a month scenario)

So if they don?t pay it back the individual RE investor or Apartment can take them to court. What is the likely hood for them to collect.
Click to expand...


So the mortgage forbearance program started since May 2020. So that?s approximately 9 months. Let?s say their mortgage is $2k or $3k a month. So they would owe $18k or $27k to the bank.


As a part of Forbearance program, are they not simply going to extend the life of a loan? There is no way someone who cant pay mortgage of 2K a month can all of sudden start paying 3000 a month once this forbearance is over. 

Maybe SGIP can enlighten us on this subject that how it is going to work.
Click to expand...


There are different options:
1. Reinstatement
2. Repayment Plan
3. Covid 19 deferral
4. Loan Modification
https://www.fanniemae.com/here-help...on-completion-your-forbearance-plan-get-facts

 
the.irvine said:
eyephone said:
So the mortgage forbearance program started since May 2020. So that?s approximately 9 months. Let?s say their mortgage is $2k or $3k a month. So they would owe $18k or $27k to the bank.

Use the same monthly numbers for renters. Do you think they will pay back the landlord that are Individual RE owners or apartment complex owners? 

The kicker if they keep on extend the forbearance another 6.  Then the numbers that is owed to the bank is $30k and $45k respectively. (Using the $2k and $3k payment a month scenario)

So if they don?t pay it back the individual RE investor or Apartment can take them to court. What is the likely hood for them to collect.
Click to expand...


So the mortgage forbearance program started since May 2020. So that?s approximately 9 months. Let?s say their mortgage is $2k or $3k a month. So they would owe $18k or $27k to the bank.


As a part of Forbearance program, are they not simply going to extend the life of a loan? There is no way someone who cant pay mortgage of 2K a month can all of sudden start paying 3000 a month once this forbearance is over. 

Maybe SGIP can enlighten us on this subject that how it is going to work.
Click to expand...

There is no written law on how this will be handled. It is completely up to the lenders. Some of them may ask for the entire amount up front, some may extend the life of the loan, some may require you to pay it within a given time frame, etc. Its completely up to the lender. And because of this, I think it will be interesting to see if there will be any laws that tells lenders how to handle forbearances once forbearances are lifted. Otherwise you'll have to see what the majority of the banks ends up doing with forbearances to see how the housing market will be impacted.

As for the point made before on the fact that foreclosures will happen, that may be true but they will be selling when the market was up 20%+. To be frank, its quite BS that homeowners get to be bailed out by the government. I'm not sure if landlords would look at foreclosures and reject a candidate because they had a foreclosure. But I sure know landlords that will reject tenants that have been evicted before. So if there were to be government support, it would make more sense to help the renters, not so much the homeowners. Maybe I'm bias because I got the short end of the stick when buying my first home, but it is quite frustrating seeing how housing could have dropped significantly if the government did not interfere.
 
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