Right now banks, Wall Street, mortgage lenders and brokers are
all hedging with higher margins due to covid19. The future is a bouquet of roses?
And why you ask?
Though the Ten Year Bond has bounced close to zero since
March 2020, it was traditional that lenders charged, call it
a profit of 170 over the Ten Year Bond. Right now they
are charging between 230 and 250. The reasons are as follows:
expected volatility is risky, there are millions in forbearance
who may go into default, values will likely decline, they can't
hire new people to temporarily fill the hamster seats who do
all the work, and mainly they expect rates to fall further which
risks early payoffs and losses. Rather than go into why the
last reason is important I want to explain how lenders will see
your forbearance in the future.
If you have income it would be best to refinance now before things get thorny.
Right now Fannie Mae and Freddie Mac are working with Congress on a bill or bills to figure out how to deal with the
massive numbers of home loans in forbearance. Temporarily
they agreed to buy some of the new loans in process until June 30,2020, soon to be cut off in the coming week. Or perhaps the Federal Government will extend? Lenders who sell loans to Fannie and Freddie cannot afford to be stuck holding a low interest rate
mortgage coupon who is not paying, or making partial payments,
this will bankrupt lenders and servicers.
So you asked for the forbearance because you are laid off?
Try and save up the money you will need when the 180 days
or whatever they wanted to grant you are over. Only maybe
will they give you more time and if you know anyone who
tried to get a modification in 2008, it takes time and the stress
is hard on everyone. What can you do to increase income and
cash flow? What can you sell now before everyone else does?
What other income can you pull in? Can you rent your master
bedroom? Start with a notepad and start brainstorming. Finding
a replacement job if your company closed is going to be difficult.
Students who just graduated from Ivy League schools with
desirable hire-able majors may have to move home. The plan
to remember during this time is that it won't be forever, things
will bounce back.
Refinancing your home is not going to be possible during forbearance, lenders will want to see you current. A Few lenders will allow you to bring the existing loan current and show you made three exact payments on time. The attestation you made to get the forbearance - the reason you used is going to come into play if you want to refinance or get a new purchase mortgage.
The existing mortgage company is not going to extend the forbearance if you have income enough to refinance or purchase another property.
Fannie Freddie USDA and HUD are NOT all on the same page as to forbearance there no one size fits all. The GSE's don't agree.
Here are some differences today as of 6/15/2020
So you got at 90 day forbearance back in late March from your servicer but you need longer. If loan is owned by Fannie/Freddie/FHA/USDA lenders were required in May to offer 180 days. You need to contact your servicer to extend for the extra ninety days.
Fannie maybe will automatically extend you for ninety days more being a total of 180 days.
Freddie expects you to contact you servicer and re attest. This means you must call or write a letter explaining your ongoing Covid19 related hardship. Some servicers require a wet signature. Some servicers will require you to be notarized and record the extension. You are changing the repayment terms, they are NOT forgiving any debt, only pushing it out in a variety of ways to the future.
There is not clear guidance in the Cares Act, yet.
HUD and USDA announced this week under the Cares Act that mortgage servicers must approve any forbearance no LATER THAN October 20, 2020. This date was set this week based on March 19th 2020 being the start of Cares Act.
In summary - law is fluid and changing
Corona virus shook up every institution.
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