Empowering military consumers–all year long

This is a joint blog by the Department of Defense (DoD), the FTC and the Consumer Financial Protection Bureau (CFPB).JUL 31, 2020

As we approach the end of Military Consumer Protection Month, it’s time to think about how we can support servicemembers all year long. Seven years ago, the Federal Trade Commission (FTC) launched Military Consumer Protection Day to highlight fraud affecting servicemembers. Since then, the observance has grown into a national, year-round campaign. Militaryconsumer.gov  provides servicemembers and their families with resources from partner agencies like Department of Defense (DoD), the FTC and the Consumer Financial Protection Bureau (CFPB) to boost their financial readiness.

The unique demands of military service can amplify financial challenges, leaving servicemembers to fend off fraudsters looking to do them financial harm or deal with the costly consequences of a bad financial decision. The Military Consumer website brings government agencies, consumer advocates, and military support groups together to spotlight free tools, information and resources that help servicemembers and families, and veterans tackle those challenges.

Winding Road…

Here are just a few you can use year-round:

  • Federal Trade Commission and Military Consumer: Military Consumer  is a one-stop shop with short tips that link to more in-depth resources from the FTC and its many partners about consumer issues specific to the military. The FTC also has information to help identity theft victims older consumers,  Spanish speakers , as well as people who need just the consumer protection basics . Check out FTC.gov/Coronavirus  to learn about steering clear of pandemic-related scams and how to deal with the financial fallout.
  • Department of Defense: The DoD offers servicemembers and military families several resources that can help them get and stay financially fit. From understanding benefits and entitlements  like the Blended Retirement System to updates on servicemember coronavirus resources  to information on military consumer protection  laws like the Military Lending Act, the DoD’s Office of Financial Readiness (FINRED)  offers financial education resources created for servicemembers at every level of financial experience. Military spouses can find a robust suite of tools and resources on MilSpouse Money Mission , a website designed to provide military spouses with trusted information they can use to actively be involved in making financial decisions for their families’ financial well-being and achieving of financial goals.
  • Consumer Financial Protection Bureau: The CFPB works to protect consumers from financial harm and empowers them with the tools they need to become smarter and savvier consumers. Consumers can visit the CFPB’s website to get up-to-date information and resources on protecting and managing their finances during the global pandemic; consumer tools to help make decisions on mortgages, auto loans, credits cards, and other products; and browse answers to hundreds of financial questions. Servicemembers can also find military-specific resources to help them at different steps in their military lifecycle and award-winning online educational resource s that can help improve money management skills. Consumers, including servicemembers, who have a problem with a financial product or service they can’t solve on their own can also submit a complaint.

While Military Consumer Protection Month is a great time to share consumer protection resources from the campaign’s many partners , our efforts don’t stop on July 31. Help us spread the word now and throughout the year.

How does owner financing work? What homebuyers and sellers need to know

Erik J. Martin – Bankrate – Thursday, August 20, 2020

"Let Me Find Your Next Property"
Are You Ready?

Buying or selling a home can be a complicated process. Sometimes, homebuyers have trouble qualifying for a mortgage. Other times, sellers yearn to cut through the red tape and net potentially more profit.
The solution for both may be owner financing. Although not very common today, owner financing is when the seller offers direct financing to the buyer instead of or in addition to a mortgage.
What is owner financing?
Owner financing occurs when the owner of a property for sale provides partial or complete financing to the buyer directly, after the buyer makes a down payment, according to Michael Foguth, founder and president of Foguth Financial Group in Howell, Michigan.
“The agreement here is very similar to a mortgage loan, except the owner of the home owns the debt instead of a bank or other lender,” Foguth says.
Owner financing is usually not reported on the buyer’s credit report. There is typically a substantial down payment required (usually 10 percent to 15 percent) that makes up for the fact that the financing is usually not dependent on the buyer’s income or credit history – although sellers are advised to perform a credit check regardless.
Chris McDermott, real estate investor and broker with Jax Nurses Buy Houses in Jacksonville, Florida, has offered owner financing himself on investment properties he’s sold. McDermott says it can be a common practice in some areas, “specifically for rural land or homes that a seller owns free and clear.”
Owner financing can be beneficial to buyers who aren’t eligible for a desired loan from a lender, or if the lender only qualifies the buyer for a portion of the purchase price. In the latter scenario, the buyer may be able to take out a first mortgage from the lender for that portion, and then obtain owner financing for the shortfall.
How does owner financing work?
In most owner financing arrangements, the owner (seller) records a mortgage against the property, which is sold via deed transfer to the buyer.
“Typically, the owner lets the buyer take over and move into the house without a mortgage, but after the buyer makes a down payment,” explains Andrew Swain, co-founder and president of Sundae, a San Francisco-headquartered residential real estate marketplace that helps sellers of distressed properties.
“The buyer signs a promissory note and makes monthly payments to the seller, but the owner keeps the title to the home as leverage in the deal,” says Swain.
“The buyer makes mortgage payments to the seller over an agreed-upon amortization schedule at a specified fixed interest rate,” McDermott says. “Typically, the seller will not hold that mortgage for longer than five or 10 years. After that time, the mortgage commonly comes due in the form of a balloon payment owed by the buyer.”
To make that balloon payment – generally a large lump sum – the buyer usually (by that time) qualifies for and obtains a mortgage refinance, likely for a lower interest rate.
Alternatively, the buyer can get a first mortgage from a bank or other lender while the seller takes a second interest in lieu of some of the down payment, explains John Kilpatrick, managing director of Greenfield Advisors in Seattle.
“Say you want to buy a $200,000 house,” Kilpatrick says. “The bank will only loan you $160,000. If the seller will take back a second mortgage for $40,000, the deal may be able to close.”
Just because a seller is providing the funds doesn’t mean the buyer won’t pay closing costs, however. According to McDermott, these charges can include deed recording and title fees.
The good news is that the costs “are usually substantially less than you’d pay with bank financing,” says Bruce Ailion, a real estate attorney, investor and Realtor in Atlanta.
Example of owner financing

In this example, the buyer agrees to make monthly payments of $1,091 to the seller for 59 months (excluding property taxes and homeowners insurance that the buyer will pay for separately).
At month 60, a balloon payment of $141,451.27 will be due. The seller will end up collecting $233,161.27 after 60 months, broken down as:

Welcome Home!!!

Pros and cons of owner financing
Owner financing offers advantages and disadvantages to both the buyer and seller.
“The buyer can get a loan they otherwise could not get approved for from a bank, which can be especially beneficial to borrowers who are self-employed or have bad credit,” Ailion says.
However, “the interest rate charged by a seller is usually much higher than a traditional mortgage lender would charge,” McDermott says, “and the balloon payment that comes due after a few years will be significant.”
The advantages to the seller are multifold. Owner financing allows the seller to sell the property as-is, without any repairs needed that a traditional lender may require.
“Additionally, sellers can obtain tax benefits by deferring any realized capital gains over many years, if they qualify,” McDermott notes, adding that “depending on the interest rate they charge, sellers can get a better rate of return on the money they lend than they would get on many other types of investments.”
The seller is taking a risk, though. If the buyer stops making loan payments, the seller may have to foreclose, and if the buyer didn’t properly maintain and improve the home, the seller could end up repossessing a property that’s in worse shape than when it was sold.
How to buy a home with owner financing or offer it
If you can’t get the financing you need from a bank or mortgage lender, a skilled real estate agent can help you find properties with owner financing.
“Just be sure the promissory note you sign is legally compliant and clearly lays out the terms of the deal,” advises Swain. “It’s also a good idea to revisit a seller financing agreement after a few years, especially if interest rates have dropped or your credit score improves – in which case you can refinance with a traditional mortgage and pay off the seller earlier than expected.”
If you want to offer owner financing as a seller, you can mention the arrangement in the listing description for your home.
“Be sure to require a substantial down payment – 15 percent if possible,” McDermott recommends. “Find out the buyer’s position and exit strategy, and determine what their plan and timeline is. Ultimately, you want to know the buyer will be in the position to pay you off and refinance once your balloon payment is due.”
It’s important to have a real estate attorney prepare and carefully review all the documents involved, as well, to protect each party’s interests.
Learn more:

Reverse mortgage pros and cons

Peter G. Miller – Bankrate – Wednesday, August 19, 2020

Reverse mortgages have become more attractive as a result of low mortgage rates, which have given homeowners the ability to access more of their home’s equity, even if its value hasn’t considerably gone up. In a reverse mortgage, this ultimately makes more money available to the homeowner, who could use the funds in retirement for healthcare, home repairs and more.
The big question for millions of seniors is: Is it worth using this tappable equity, or do the risks outweigh the benefits? Here we’ll examine the pros and cons.
What is a reverse mortgage?
A reverse mortgage is a form of cash-out refinancing that allows property owners 62 and older to convert real estate equity into spendable cash.
Virtually all reverse mortgages are insured through the Federal Housing Administration, (FHA), which means if the debt is not repaid by the borrower, it will be repaid with FHA reserves. The government calls reverse mortgages “HECMs,” short for Home Equity Conversion Mortgages, and borrowers must pay insurance premiums to participate. These premiums are used to fund the FHA’s reserves.
How do reverse mortgages work?
Reverse mortgages are very different from traditional mortgages. With a traditional mortgage, if you borrow $100,000 at 3.4 percent fixed-rate interest for 30 years, you’ll have a $443.48 monthly payment (principal and interest).
However, if you borrow $100,000 with a reverse mortgage, your required monthly payments for principal and interest are zero.
How is this possible?
With our model $100,000 mortgage, the borrower pays $443.48 each month. Of this amount, $160.15 is paid toward principal in the first month to reduce the loan balance. The rest of the payment – $283.33 – is interest, or what the lender charges you for loaning you money.

APR is how much the money cost.

Reverse mortgage cons

Why reverse mortgages may be more useful today
Two market trends may cause seniors to re-examine their reverse mortgage options.
First, in the past decade, home equity has grown enormously as home values have risen. Equity is generally defined as the value of a home less outstanding mortgage balances. While not all homeowners have benefited from rising values, millions have:

Second, mortgage rates have fallen through the floor. According to Bankrate, the national average rate for fixed-rate 30-year financing was 3.24 percent as of August 13.
How reverse mortgage requirements have changed over the years
HUD HECM standards have changed during the past few years. The reason? Massive program losses in the billions of dollars.

As a result of these changes, the number of reverse mortgages insured by the FHA fell from 60,091 in fiscal year 2013 to 31,274 in fiscal year 2019.
HUD has also substantially reduced reserve mortgage losses. In fiscal year 2018, the HECM reserve was down $13.63 billion. By fiscal year 2019, the potential loss had been reduced to $5.92 billion.
It is very possible that reserve losses might actually be wiped out in fiscal year 2020 if claims continue to fall and home prices remain at least stable.
Should you get a reverse mortgage?
Reverse mortgages are complex – they work for some homeowners but not for all. You need to consider your finances and preferences, as well as your estate plans and tax implications, to see if a HECM is right for you.
If you want to learn more, it’s best to shop around and speak with multiple lenders. Consider consulting with a professional for your estate and tax needs, as well.
Learn more:

A troubling tale of a Black man trying to refinance his mortgage

Diana Olick – CNBC – Wednesday, August 19, 2020

Black applicants are rejected by mortgage and mortgage refinancing lenders at much higher rates than Whites.

Akili Akridge had all the right stats: a steady six-figure salary, an 800 FICO credit score, and 20% equity in a home.

He experienced firsthand the persistent racial discrimination in the housing market.

This Black borrower has an outrageous story about his mortgage refinance. 
When the coronavirus struck the U.S. in early spring, and the stock market went into freefall, mortgage rates began to plummet as well. Thousands of homeowners rushed in to refinance their loans, getting much-needed savings on their monthly payments.
Akili Akridge, a Black homeowner in Maryland, saw all the flurry over low rates in April, so he decided to jump in too. The rate on his 30-year fixed mortgage at the time was 4.125%, well above the market rate of just over 3%. 
“I’m watching the news and keeping track, and I’m talking to friends who are refinancing, and they’re saying that they got in the low threes,” said Akridge. “I said of course, this would be a great thing for us to do. Why not?”
Akridge bought the townhome with his partner, Melissa, just over two years ago. She is White. The mortgage was in her name. Since she recently started her own business, which makes the mortgage process generally more complicated, they figured it would be easier for Akridge to refinance the loan on his own.
Akridge had all the necessary financial credentials: He had been working at his company for more than two years, where he said he earned a six-figure salary. He also said he had about an 800 FICO credit score, and that he and Melissa had close to 20% equity in the home, more than enough to refinance.

michaelgouldgroup.com

So he went to an online mortgage marketplace and filled out all of his financial information. Then the calls began coming in. All the lender agents asked his race, but they all said he was not required to disclose it. He told the first lender he was Black.
“So, the gentleman came back and advised, you know, turns out we’re not interested in townhomes, right now. He just said it’s an industry standard right now,” Akridge said. “And I’m looking at my better half and kind of questioned, is this accurate? But, I let it go because, you know, maybe that’s just something that he did.”
He also disclosed his race to the second lender who called. That lender said they could do the refinance — apparently there was no ‘industry standard’ with townhomes — but at a higher rate than he and Melissa already had.
“So I started to realize maybe, maybe I need to not disclose my race,” he said.
More from Invest in You:
This zero-down payment mortgage helps lower-income people become homeowners
Buying your first home may cost more than you think. Here’s what to expect
Covid-19 has upended schools. It will also worsen racial and economic inequalities, experts warn
Discrimination in home lending goes back to the beginning of home lending itself. During the last housing boom, when subprime mortgages were all the rage, predatory lending to minority borrowers was rampant. When the mortgage market came crashing down, taking the economy with it, some major lenders were held accountable. They ended up paying massive, multibillion-dollar settlements to the federal government. But there is clearly still bias in the market.
A majority (59%), of Black homebuyers are concerned about qualifying for a mortgage, while less than half (46%) of White buyers are, according to a recent survey by Zillow, a home listing website, which launched its own mortgage lending arm, Zillow Home Loans, late last year. That is because lenders deny mortgages for Black applicants at a rate 80% higher than that of White applicants, according to 2020 data from the Home Mortgage Disclosure Act.
For refinances specifically, Black borrowers are denied mortgage refinance loans, on average, 30.22% of the time, far higher than the overall denial rate of 17.07%, according to an analysis of the HMDA data by LendingTree, an online mortgage marketplace.
Part of that high denial rate may be because minority consumers overall have lower incomes and lower credit scores than White consumers. They also tend to live in more disadvantaged neighborhoods with lower home values. None of that was the case with Akridge, whose townhome is in a brand new development in a quiet suburb just outside Washington, D.C.
Two more lenders called Akridge, and he decided not to disclose his race. Both offered him competitive market rates on a refinance. One even offered to beat the other.
“The only difference is the fact that I didn’t disclose my ethnicity, which leaves me with a lot of questions, especially when it comes to things such as predatory lending that we know are real,” Akridge said.
Suddenly, with race out of the picture, the mortgage process was easy and competitive, as it had been for Melissa two years before.
“I know that I am not the only one to go through this. I know I’m not the first. I know I won’t be the last, but at least I want someone else out there to understand that this is not normal, that this is not right,” he said.

©2005 michaelgouldgroup.com

Month-To-Month Lease??

A month-to-month lease is a contract between the landlord and tenant that establishes tenancy with no scheduled end date. Instead, either the landlord or tenant may terminate the contract at will, as long as proper notice is given. Most state or local laws require either 30, 60 or 90 days’ notice, but the lease agreement will specify.

If you and your landlord can work amicably, a month-to-month lease may be a blessing to give you the necessary time to find the right housing. Of course, it can also backfire and cause headaches on both sides of the deal.

[See: Best Renters Insurance Companies of 2020]

Reasons for a Month-to-Month Lease

Here are four reasons opting for a month-to-month lease may be in your best interest.

You might move soon. You’ll most likely see a month-to-month agreement when your yearlong lease comes to a close, as landlords commonly give tenants the option to renew their lease for a full year or switch to a month-to-month contract. If you’ve got any major life changes coming up in the next year – say you’re transferring to a new city, getting married or planning to purchase a home – the month-to-month option gives you the flexibility you need for those situations. If you end up being able to stay, a month-to-month lease can also be converted to a long-term lease with relative ease.

Even if your landlord doesn’t offer a month-to-month option, there’s no harm in presenting your situation to the landlord – if you always pay rent on time and haven’t caused any damage to your apartment, there’s a chance the landlord will see the benefit of keeping a pleasant tenant without a specific end date. David Mele, president of real estate information site Homes.com, says renters shouldn’t be afraid to offer something outside the typical lease: “Sometimes renters don’t realize they can negotiate rent.”

You have roommates. Whether you found them on Craigslist or they’re your childhood best friends, roommates can be difficult to work with when it comes to planning out the next year. If one roommate is expecting to move out before a yearlong lease is up, rather than risking an illegal sublease or releasing the vacating roommate and amending your lease to bring on a newly vetted roommate, you can simply start a new month-to-month lease with the replacement – as long as the landlord agrees, of course.

There’s no penalty for breaking the lease. Uncertainty is a major stressor for renters, regardless of the type of lease contract they have in place. When you’re on a fixed-term lease and you need to move out prior to the end date, “There can be a cost to break that lease early,” Mele explains. There’s a good chance you’ll pay a couple of additional months of rent after moving out while your landlord preps and markets your apartment, and you might even end up having to pay rent for the duration of the lease if your landlord doesn’t find a new tenant.

If you might need to move within the next year, or you’re concerned about loss of income in the near future, a month-to-month lease allows you to end the rental agreement without additional fuss.

Your next home is under construction. Construction always adds a degree of chaos to planning your rental situation, and you need to be ready for a wrench to be thrown into the mix.

You may have commissioned your first home to be a new build, or you may be looking to relocate to a new apartment building downtown that’s not quite done, but either way you should anticipate delays by having leeway in your current lease, says Mary Gwyn, chief innovator of Apartment Dynamics, a property management firm that also trains other companies on property management practices. “That’s where the flexibility is really to your benefit,” she says.

[Read: What to Do if You Can’t Pay Rent During the Coronavirus Pandemic]

Reasons Against a Month-to-Month Lease

Before you start negotiating your new month-to-month contract, consider these four downsides that may make the arrangement a less desirable option.

You’ll likely pay more. A month-to-month lease provides you with timeline flexibility, but it typically comes at a monthly financial cost. Because landlords have to offset the higher risk for a vacancy in the near future, they’ll charge higher rent. Often, the property’s lender will include additional fees for taking on a riskier month-to-month renter rather than signing on a long-term tenant, so the landlord will offset those fees by charging more in rent.

“At any of our communities, if someone opts to go month to month, they pay the freight for that,” Gwyn says. “Going month to month, fees can run $30 to $130 (per month).” In some major cities with competitive rental markets, the difference between a month-to-month lease and yearlong contract for the same apartment can be a few hundred dollars.


Your landlord can end the lease, too. Being able to move with a simple 30-day notice may be ideal for you, but keep in mind that your landlord has that same freedom. A month-to-month contract allows your landlord to give you notice that you need to find a new home for any reason.

If the landlord is advertising an apartment as a month-to-month lease, he or she may have construction plans in the near future. That’s the only scenario in which Gwyn has seen month-to-month leases marketed: “(The landlord) planned to either raze the property – as in raze it to the ground … or they were going to do a significant renovation and evict everybody, so it worked to the landlord’s advantage,” she says.

Landlords might say no. While plenty of landlords are opposed to month-to-month leases to avoid an unexpected increase in vacancy, some are simply unable to make such a deal. Depending on the loan the landlord currently has on the rental property, a lender has the ability to restrict month-to-month leases entirely. “We had one lender who even prohibited us from having us have any month-to-month lease, which is almost impossible,” Gwyn says.

[Read: What to Do if Your Tenant Doesn’t Pay Rent]


You’ll lose out on concessions. New rental buildings are being constructed every month, particularly in major urban centers, and to remain competitive they’ll offer concessions like a free month of rent, waived amenities fees and even a free TV. But if you’re considering a month-to-month lease, read the fine print of any specials carefully – rent decreases or free months often require a long-term lease.

While some landlords may not require an increase in rent to go month to month or may still include move-in specials, you’re typically trading the financial deal for the flexibility to move out. Consider your priorities carefully to avoid paying more than is necessary on your rent in the long run.

By Devon Thorsby, Editor, Real Estate

What Do You Think?

OPINION: We’ll Protect America’s Suburbs

We reject the ultra liberal view that the federal bureaucracy should dictate where and how people live.

By President Donald Trump and HUD Secretary Ben Carson

August 16, 2020

https://on.wsj.com/2Eb6mKR

The crime and chaos in Democrat-run cities have gotten so bad that liberals are even getting out of Manhattan’s Upper West Side. Rather than rethink their destructive policies, the left wants to make sure there is no escape. The plan is to remake the suburbs in their image so they resemble the dysfunctional cities they now govern. As usual, anyone who dares tell the truth about what the left is doing is smeared as a racist.

We won’t allow this to happen. That’s why we stopped the last administration’s radical social-engineering project that would have transformed the suburbs from the top down. We reversed an Obama-Biden regulation that would have empowered the Department of Housing and Urban Development to abolish single-family zoning, compel the construction of high-density “stack and pack” apartment buildings in residential neighborhoods, and forcibly transform neighborhoods across America so they look and feel the way far-left ideologues and technocratic bureaucrats think they should.

©2016 michaelgouldgroup.com

We reject the ultraliberal view that the federal bureaucracy should dictate where and how people live. We believe the suburbs offer a wonderful life for Americans of all races and backgrounds when they are allowed to grow organically, from the bottom up. That’s how America’s suburbs are today—except those that have already been ruined by poor planning and policies. 

Every American has a stake in thriving suburbs. The shameful days of redlining are gone, and a majority of the country lives in the suburbs, including majorities of African-Americans, Hispanic Americans and Asian-Americans. America’s suburbs are a shining example of the American Dream, where people can live in their own homes, in safe, pleasant neighborhoods. The left wants to take that American dream away from you.

In spite of this remarkable success, a once-unthinkable agenda, a relentless push for more high-density housing in single-family residential neighborhoods, has become the mainstream goal of the left. For eight years under Obama-Biden, HUD pressured Westchester County, N.Y., to change its zoning rules. Although Westchester was never found to have discriminated against anyone, HUD used the threat of withholding federal money to pressure it to raise property taxes and build nearly 11,000 low-income, high-density apartments. Other liberal-run cities and states have also taken up the cause. Minneapolis abolished single-family zoning this year—a few months before it voted to abolish its police force. Oregon outlawed single-family zoning last year. For the past three years, the state senator who represents Speaker Nancy Pelosi’s San Francisco has led a push to abolish single-family zoning in California.

Liberals even believe this unprecedented federal disruption of the suburbs is required to battle climate change. They say the suburbs are a problem because of unacceptably high levels of greenhouse gases generated by a family with its own house, a yard, two cars and a dog.

The Biden-Sanders unity platform calls for reimposing the Obama-Biden dystopian vision of building low-income housing units next to your suburban house. Some leading Democrats want to go even further. Sen. Cory Booker and Rep. James Clyburn have introduced a bill that would hold hostage more than $12 billion in federal grants to states for safe roads unless local politicians agree to densify the suburbs. As far as the White House is concerned, this bill is dead on arrival.

America was founded on liberty and independence, not government coercion, domination and control. It would be a terrible mistake to put the federal government in charge of local decisions—from zoning and planning to schools. Our Founders understood this was the path to tyranny.

Americans of all walks of life have voted with their feet and put down roots in the suburbs. Across income segments and demographic groups, households have higher rates of homeownership in the suburbs than in urban centers. Decades of liberal governance have tragically made many urban cities unaffordable and others unlivable, unable to provide for their citizens’ basic needs in housing, public safety and education.

While we fight every day to restore our cities’ greatness with innovative means like opportunity zones, the left opposes us on rebuilding the economy, on law and order, and on school choice. We won’t let them export their failures to America’s suburbs. We will save our cities, from which these terrible policies have come, and we will save our suburbs.

Mr. Trump is President of the United States. Dr. Carson is Secretary of Housing and Urban Development.

###

We hope that you will want to continue receiving information from HUD.
We safeguard our lists and do not rent, sell, or permit the use of our lists by others, at any time, for any reason.

Connect with HUD on Social Media and follow Secretary Carson on Twitter and Facebook.

HUD COVID-19 Resources and Fact Sheets

michaelgouldgroup.com

CoreLogic Reports Doubling in Delinquent Mortgages

The surge of mortgage delinquencies expected in the wake of the pandemic has apparently begun, and the numbers are stark. According to a report released today (Aug. 11) by CoreLogic (NYSE: CLGX), 7.3% of U.S. residential mortgages were in some state of delinquency — ranging from 30 days past due to already in foreclosure — at the end of May.

That’s about double the delinquencies from a year ago, when the May 2019 rate was 3.6%, the data and analytics firm said in a news release. And the rate of serious delinquencies — 90 days or more past due and/or in foreclosure — rose for the first time since the Great Recession in 2010.

Ominously, the CoreLogic announcement added, “Absent further government programs and support, CoreLogic forecasts the U.S. serious delinquency rate to quadruple by the end of 2021, pushing 3 million homeowners into serious delinquency.”

CoreLogic says its monthly Loan Performance Insights report includes only first liens and that its delinquency, transition, and foreclosure rates are measured only against homes that have an outstanding mortgage.

michaelgouldgroup.com

Some pain everywhere, lots of pain in some places.

The May report found year-over-year increases in overall delinquencies in all 50 states and an increase in serious delinquency rates in more than 75% of the nation’s metro areas. There also was a high correlation between higher rates and areas most affected by COVID-19.

For instance, the largest overall delinquency gains in May were 6.4 percentage points each in New Jersey and Nevada, both hotspots at the time. Florida was up 5.8 percentage points.

High unemployment = high anxiety

“Government and industry relief programs have helped to cushion the initial financial blow of the pandemic for millions of U.S. homeowners,” said Frank Martell, president and CEO of CoreLogic.

Indeed, with unemployment still high, the future of many of these mortgages, and the families living in those homes, is murky, especially as unemployment benefits expire and foreclosure bans and forbearance plans expire, leaving those homeowners scrambling for options.

Millions of new foreclosures could disrupt not only the real estate market but millions of lives, communities, and American society in general.

Initial Forbearance Periods are Ending; Here’s What to Do Next


Jul 21, 2020 by Aly J. Yale

The CARES Act threw property owners a bone back in March, allowing for up to 180-day forbearances on government- and GSE-backed mortgages. But it’s now been months, and for many, those initial grace periods are starting to expire.

This image has an empty alt attribute; its file name is img_1023.jpg
michaelgouldgroup.com

If you’re in this boat, that means two things: First, mortgage payments will begin to resume. You’ll need to make your regularly scheduled payments — or risk going into default.https://9d9e8419191ffa071cfaff53a31c08ba.safeframe.googlesyndication.com/safeframe/1-0-37/html/container.html

On top of this, you will also need to work with your servicer to repay your missed payments. You can choose to pay a lump sum, defer your missed payments to the end of the loan term, modify your loan, or set up a monthly repayment plan. (If you have a private loan not backed by a government agency, Fannie Mae, or Freddie Mac, your options might be different here, so check with your servicer.)

Fortunately, letting your forbearance period expire isn’t your only option. If you’re not ready to start making payments again, you have a few alternatives to choose from. Here’s what you can do:

1. Extend your forbearance.

The CARES Act actually allows for up to two 180-day forbearances, so if you’re really struggling financially, you can contact your mortgage servicer and ask for an extension. This is a popular option, it seems. According to data from the Mortgage Bankers Association, about 43% of mortgage loans currently in forbearance are actually extensions.

“Forbearance can last up to a year,” says Tendayi Kapfidze, chief economist at loan marketplace LendingTree. “Call your lender and request an extension if you need more time.”

Just remember that the more payments you miss, the more you’ll owe once that forbearance period ends.

2. Refinance.

You can also refinance your mortgage loan to make payments more affordable. This might mean refinancing into a longer-term loan or to one with a lower interest rate. Rates on 30-year fixed-rate mortgages are currently at all-time lows, averaging 2.98% according to Freddie Mac.

According to Kapfidze, qualifying may be hard. “Lenders have tightened standards,” he says.”You will need to show that you are a good candidate for refinancing.”

3. Modify your loan.

A loan modification is similar to refinancing, except you don’t get a new mortgage; you just change the terms of your existing one. You’ll need to reach out to your servicer to discuss potential options for modification, but you may be able to lengthen your loan term, reduce your rate, or make other changes to your loan, so it’s always worth asking.https://9d9e8419191ffa071cfaff53a31c08ba.safeframe.googlesyndication.com/safeframe/1-0-37/html/container.html

4. Talk to a housing counselor.

If you’re not sure what to do, talking to a housing counselor can help shed light on your options. HUD has a long list of counseling agencies across the country, so just select your state and find one near you. They can walk you through your post-foreclosure choices as well as advise you on budgeting, refinancing, avoiding default and foreclosure, and more.

5. Sell the house.

It’s not ideal, obviously, but selling your property can be an option — especially if you’re worried your income won’t bounce back by the end of another forbearance period. Sales are actually strong right now, and home prices are still rising (at least for now), so listing that home soon could mean serious profits.

If you do go this route, consider holding on to those proceeds until the economic uncertainty blows over. It will provide a little financial cushion in case you fall behind on other bills or debts.

The bottom line

Whatever you do, don’t let your forbearance period expire and then continue skipping payments. Though foreclosures can’t technically start until September (under the CARES Act), falling behind on your payments can seriously ding your credit — and your chances at getting another loan or property in the future.

Your best bet is to talk to your servicer about your options and to stay on top of the headlines. As Bankrate economic analyst Mark Hamrick explains, “Since Congress has yet to come to terms on what is expected to be another round of pandemic relief legislation, it is possible that this remains a fluid issue, meaning more help could be on the way.”

The “Unfair Advantages” of Real Estate Just Got a Whole Lot Better

Investing in real estate has always been one of the most effective paths to financial independnece. That’s because it offers incredible returns and even more incredible tax breaks.https://9d9e8419191ffa071cfaff53a31c08ba.safeframe.googlesyndication.com/safeframe/1-0-37/html/container.html

These benefits weren’t enough for Uncle Sam, though, as a new tax loophole now allows those prudent investors who act today to lock in decades of tax-free returns. We’ve put together a comprehensive tax guide that details how you can benefit from this once-in-a-generation investment opportunity. Simply click here to get your free copy.

Share on Facebook.
MICHAELGOULDGROUP.COM
Share on Twitter.
Share on LinkedIn.

The hidden link between private mortgage insurance and your credit score

It’s something few homebuyers understand but more should. It’s the importance of your credit score when buying a home, especially if you have a low down payment and must buy private mortgage insurance.
Private mortgage insurance, known as PMI, protects the lender’s investment when the borrower pays less than 20 percent down. When the homebuyer reaches 20 percent equity, PMI is not required and there are several ways to get rid of it. Until then, the buyer must pay a monthly insurance premium, in addition to the mortgage.
Credit score is used to determine PMI eligibility, price
Insurers, like mortgage lenders, look at your credit score when determining your PMI eligibility and cost.

“I would say it’s one of the bigger drivers of how mortgage insurers tend to price,” says Steve Keleher, senior vice president of portfolio management and pricing at Radian, which offers PMI and a suite of other mortgage and real estate services. “We protect the lender and investor; anything that increases the likelihood of delinquency and foreclosure increases the cost.”
Insurers also put a lot of weight on the size of your down payment and your debt-to-income ratio. “In general, private mortgage insurance is available for borrowers with credit scores as low as 620 with down payments as low as 3 percent,” says Anthony Guarino, senior vice president of pricing and credit policy for Genworth Mortgage Insurance.
Many homebuyers required to buy PMI
Private mortgage insurance is a common cost, especially for first-time homebuyers, who accounted for one-third of home purchases in 2019, according to a survey by the National Association of Realtors.
First-time buyers typically paid down 6 percent, financing 94 percent of their home purchase, the NAR survey says, while repeat home buyers typically paid 16 percent down, financing 84 percent of the purchase price. Repeat buyers often have the proceeds of a home sale to use toward a down payment, enabling them to borrow less.
The annual cost of PMI is typically expressed as a percentage of the loan amount and is paid in equal monthly payments. So, the more you borrow, the higher your PMI payment.
Credit scores and PMI rates are linked
PMI costs have a broad range, roughly 0.25 percent to 1.5 percent of the amount borrowed. Insurers use your credit score, and other factors, to set that percentage. A borrower on the lowest end of the qualifying credit score range pays the most.
“Typically, the mortgage insurance premium rate increases as a credit score decreases,” Guarino says. He offers this example:
A house sells for $333,333 and the borrower pays 10 percent down, leaving an outstanding loan balance of $300,000 with a 30-year, fixed-rate mortgage. A borrower with a “very good” FICO credit score (at least 740) might pay 0.20 percent to 0.30 percent of the loan balance for PMI, or $50 to $75 a month, says Guarino.
A borrower with a “good” FICO credit score (670-739) will pay more than the “very good” borrower, says Guarino, estimating 0.35 to 0.40 percent of the $300,000 mortgage, or $80 to $100 a month.
But a homebuyer with only “fair” credit, in the neighborhood of 620-660, might pay 0.75 to 1.50 percent of the loan balance, or $188 to $375 per month, Guarino says.
“A small change in credit score, 1 to 10 points, may have limited impact,” Guarino notes, “but a lower credit score ranging from 620 to 660 could result in a cost two to three times that of someone with an outstanding credit range of 760 to 800.”
Mortgage insurance for FHA loans works differently, but your credit score still counts when it comes to how much you pay.
There are a number of steps you can take to improve your credit score, especially if you plan to buy a house. “Credit score is one of those things that can drive tangible savings,” Keleher says. “That is something within the borrower’s control and will have a benefit when it comes to a mortgage loan.”
A good credit score can save you tens of thousands of dollars in interest on a mortgage. Use Bankrate’s mortgage calculator to estimate your monthly payment.
PMI paves a path to homeownership
Private mortgage insurance is an added cost of homeownership that buyers dread, but the fact is, many people would not be able to buy a home without it. PMI opens doors for borrowers who can’t get over one of the biggest hurdles to homeownership: the 20 percent down payment.
PMI has helped more than 30 million families nationwide to become homeowners over the past 60 years, according to the U.S. Mortgage Insurers, a trade association.
“One of our goals is sustainable homeownership,” says Keleher, of Radian. “We can help borrowers purchase homes sooner than they would otherwise be able to. We are insuring the American Dream in a sustainable way.”
Learn more:

michaelgouldgroup.com

Learn more: Libby Wells – Bankrate – Monday, August 10, 2020

Up to 40 million people are at risk of being kicked out of their homes

As President Donald Trump calls for another federal eviction moratorium, a new report has shed light on just how many Americans are facing housing insecurity as a result of the coronavirus pandemic and the associated economic downturn.

Between 30 and 40 million people in the U.S. could be at risk of eviction in the next several months, according to a report released Friday by a group of housing researchers. The report aggregated existing research related to the housing crisis caused by COVID-19.
The researchers said the current situation could be “the most severe housing crisis” in the nation’s history.

As the novel coronavirus first began spreading across the country and prompting business shutdowns, many state and local lawmakers took swift action to enact eviction moratoriums to protect people who suddenly found themselves without a source of income to pay their bills. Many renters were already in a precarious position before the pandemic: Research from the Joint Center for Housing Studies of Harvard University found that nearly half of all renter households were cost-burdened before the pandemic, meaning over a third of their income went toward rent.
Read more:Landlords must notify tenants about eviction proceedings in multi-family buildings, housing regulator says

Michaelgouldgroup.com

At the federal level, the CARES Act placed a temporary moratorium on evictions for renters living in buildings supported by federal funding. But that moratorium expired at the end of July, and many of the moratoriums at the state and local level have also ceased.
“The vast majority of states lack protective eviction moratoriums and housing stabilization measures that could support renters facing rent hardship,” researchers wrote, citing work done by the Eviction Lab at Princeton University and health and housing law expert Emily Benfer.
‘The housing market embodies the inequality that was magnified and exacerbated by COVID-19.’ — Diane Swonk, chief economist at accounting firm Grant Thornton

Previously, research showed that people of color are disproportionately at more risk of being evicted currently.

More than one-quarter of Black renters nationwide missed last month’s rental payment, U.S. Census Bureau survey data show. And nearly one in six Black renters said they have no confidence that they will be able to pay the following month’s rent.
And even as the economy has recovered jobs lost because of the pandemic, America’s renters are struggling to make their monthly payments. Roughly a third of all renters nationwide failed to make a full housing payment as of the first week of August, according to survey data from real-estate website Apartment List.

The tenuous situation facing renters is in sharp contrast with the current state of affairs for homeowners and home buyers.
“The housing market embodies the inequality that was magnified and exacerbated by COVID-19,” Diane Swonk, chief economist at accounting firm Grant Thornton, wrote on Twitter(TWTR) “My stomach churns every time I think of what the evictions will mean for homelessness, which was rising when we were at 3.5% unemployment.”

Mortgage rates have fallen to record lows eight times amid the pandemic. As a result, thousands of homeowners have refinanced their home loans in recent months, and many prospective home buyers have flooded the market looking to scoop up properties to lock in low rates.
Also see: Americans’ household debt fell for the first time since 2014 — but that doesn’t mean people are paying off their loans

Most homeowners who are facing financial trouble still have lifelines available to them. The CARES Act stipulated that any homeowner with a federally-backed mortgage could receive forbearance for up to one year. During that time, homeowners can make reduced monthly payments or skip paying altogether.
Once forbearance ends, homeowners who are still in financial trouble will have a wide array of loss mitigation options available to them to adjust their mortgages in order to avoid default or foreclosure.

%d bloggers like this: