Refinance Before Forbearance ?

Mortgage Rates are going to fall some more in the coming months.
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.

Our COVID-19 Response - Freddie Mac

Search Results Web results Guide to coronavirus mortgage relief options | Consumer ...

PPP Loan Programs

PPP and Other Corona Virus Loan Programs

Help New Program Coming!

  Updates on federal loan programs:

1. On June 5, 2020, the President signed into law the Paycheck Protection Program Flexibility Act to provide borrowers greater flexibility in getting their loans forgiven. 
2. Today on June 8th, U.S. Treasury Secretary Steven Mnuchin and SBA Administrator Jovita Carranza released a joint statement outlining the changes. 
   • Please note that while the "covered period" of the loan was extended from 8 weeks to 24 weeks, the deadline for applying for a PPP loan application remains June 30, 2020.  If you're still interested in applying for a forgivable PPP federal loan, please do not delay. If you need help, contact me I can get you in touch with someone at no cost. You may need your accountant or CPA to assist if you are not a numbers person. Get out your IRS taxes for 2018 and 2019 if you filed and find the payroll numbers, count of employees before end of February, your tax Id number it's not that difficult
   • There is still more than $130 billion in available funds and you must apply by the end of this month.
   • On June 8, 2020, the Federal Reserve announced the expansion of the Mainstreet Lending Program to small and medium-size businesses. While these types of loans are not the forgivable type and were previously only available to major corporations, the terms may be attractive with very low interest rates and provide much more flexibility for use of funds for operating costs rather than just 75% payroll. $75 billion is being made available for these loans through the CARES Act. Please note that the Federal Reserve Board also confirmed that they will soon be announcing an additional loan program specifically for nonprofit organizations.
   • 
     
   •  Key highlights of the newly expanded Main Street Loans include:
   • Allowing eligibility for companies with fewer than 15,000 employees
   • Lowering the minimum loan size for certain loans to $250,000 from $500,000
3. • Increasing the maximum loan size for all facilities
   • Increasing the term of each loan option to five years, from four years
   • Extending the repayment period for all loans by delaying principal payments for two years, rather than one year
   • Deferring interest payments for one year
   • Interest rates set at LIBOR+3% Libor today is .67 and going forward LIBOR is going away and will be replaced by two other averaging indexes
   • Raising the Reserve Bank's purchasing of all loans to 95%

https://www.ebay.com/itm/164236141874

https://www.ebay.com/itm/164236731287

PPP Under Two Million Given a Break

The Office of Inspector General (OIG) begins its review of the Small Business Administration’s (SBA’s) implementation of the Paycheck Protection Program (PPP) provisions of Section 1102 of the Corona virus Aid, Relief, and Economic Security (CARES) Act.

Thus far:

1,661,000 loans granted in first funding totaling nearly $342.3 billion dollars

and an additional 2,441,369 loans, totaling about $183.5 billion.

As we move forward there still remains confusion and unanswered questions.

How will underserved and rural markets get loans?

How to provide butts in seats proof of employees for forgiveness?

How will deferments of loans be granted?

Why is the information publicly registered?

How to account as cash or accrual?

How are small business to prove they don't have capital to repay?

5/13/2020 

Today, the SBA released a new FAQ which addresses one question. According to SBA FAQ #46, any borrower (combined with its affiliates) with a PPP loan amount below $2 million , will “be deemed to have made the required certification concerning the necessity of the loan request in good faith.” This is due to the reasoning that borrowers with loan amounts below this threshold are less likely to have access to other sources of cash flow than borrowers who receive loans above the $2 million threshold. This means they do not have to hire a CPA, pay a grant writer and an auditor to review their books.

As time rolls forward and these new programs bring up more questions, hopefully your local bank and the SBA will have all the right answers. 

I know of seven small business owners who applied and received funding, and one who did not get funding from his existing bank who was overwhelmed. All are operating and employing the same number of persons who work to support the business and their families

Wish you all health and prosperity, now is the time for growth mode let us help each other on the path.

Update 5/27/2020 all things are liquid and please be safe out there

“Loan Forgiveness Application” (SBA Form 3508) that walks the user through a series of calculations, the outcome of which is the amount of loan forgiveness the borrower can claim. 

The form can be found here:  https://home.treasury.gov/system/files/136/3245-0407-SBA-Form-3508-PPP-Forgiveness-Application.pdf – or here: https://www.sba.gov/funding-programs/loans/coronavirus-relief-options/paycheck-protection-program#section-header-8

The form is complicated and requires study.  The press release announcing the form’s publication promises additional guidance will be forthcoming.

I do see some helpful clarifications in the form which address some of the detailed questions that businesses have been asking.  I have highlighted three of them in the press release below. 

Release Date: May 15, 2020                 Contact: Press_Office@sba.gov, (202) 205-7036

Release Number: 20-41                          Follow us on Twitter, Facebook, Blogs & Instagram

 

SBA and Treasury Release Paycheck Protection Program

Loan Forgiveness Application

WASHINGTON—Today, the U.S. Small Business Administration, in consultation with the U.S Department of the Treasury, released the Paycheck Protection Program (PPP) Loan Forgiveness Application and detailed instructions for the application. 

The form and instructions inform borrowers how to apply for forgiveness of their PPP loans, consistent with the Coronavirus Aid, Relief, and Economic Security Act (CARES Act).  SBA will also soon issue regulations and guidance to further assist borrowers as they complete their applications, and to provide lenders with guidance on their responsibilities.

The form and instructions include several measures to reduce compliance burdens and simplify the process for borrowers, including:

• Options for borrowers to calculate payroll costs using an “alternative payroll covered period” that aligns with borrowers’ regular payroll cycles [see “Alternative Payroll Covered Period” on page 1 of the form]
• Flexibility to include eligible payroll and non-payroll expenses paid or incurred during the eight-week period after receiving their PPP loan
• Step-by-step instructions on how to perform the calculations required by the CARES Act to confirm eligibility for loan forgiveness
• Borrower-friendly implementation of statutory exemptions from loan forgiveness reduction based on rehiring by June 30  [see “FTE Reduction Safe Harbor” on pages 8 and 9 of the form]
• Addition of a new exemption from the loan forgiveness reduction for borrowers who have made a good-faith, written offer to rehire workers that was declined  [see “FTE Reduction Exceptions” on page 8 of the form]

The PPP was created by the CARES Act to provide forgivable loans to eligible small businesses to keep American workers on the payroll during the COVID-19 pandemic.  The documents released today will help small businesses seek forgiveness at the conclusion of the eight-week covered period, which begins with the disbursement of their loans.

VA borrower paid

VA LOANS

Va only allows Borrower paid closing cost  up to 1% with restrictions on other allowable fees. I hope this helps clarify how the Veterans Administration protects military from over paying for a mortgage

https://www.benefits.va.gov/WARMS/docs/admin26/handbook/ChapterLendersHanbookChapter8.pdf